Farm Contracts and Biosecurity: The case of Broiler Farmers in Bali, Indonesia

Abstract

The present study aims to first to investigate the factors influencing farmers' selection of contract companies and second to identify a bonus system that best reward farmers for biosecurity adoption. The study employed two approaches in the analysis to achieve the research objectives. First, an econometrics approach of three logit models was developed to examine the factors influencing famers' selection of contractor company. Second, the gross margin approach considering two main price conditions, namely generic and actual price schemes to evaluate the bonus system that best reward biosecurity implementation. The data used was cross-sectional data from 100 farmer respondents. Result of the study shows that there are six factors affecting farmers' choice of contractor company. These include farmer experience in chicken rearing, main occupation, farm size, company size, contract price and number of bonuses offered by the company. With regard to the gross margin analysis, this research presents that big companies do not necessarily provide better support for biosecurity implementation than smaller companies. The amount of bonus reward in the system together with the type of bonuses is important for consideration. Contract 6 with three types of bonuses best reward farmers for biosecurity adoption, under the generic price assumptions. While Contract 5 with four types of bonuses provided the best reward system under the actual price condition. Findings from this research are informative to both government and contractor companies in considering supports for biosecurity implementation. Although the analysis is limited to one production year, the study opens to future research on the evaluation of long term biosecurity benefits.