Contract bonus systems to encourage biosecurity adoption on small-scale broiler farms in Indonesia

Abstract

Ongoing economic losses in the poultry industry, due to endemic diseases such as highly pathogenic avian influenza and Newcastle disease, ensure that biosecurity adoption on small-scale broiler farms remains a priority for Indonesia. However, given their economic constraints and the nature of the market for their products, these smallholders need to be convinced that there is an economic benefit to them from investing in biosecurity. As the majority of smallholders manage their birds under a contract, these contract companies not only need to be involved in the discussion but, if they are not prepared to assist directly in assisting with improved biosecurity, need to ensure that the conditions of the contract do encourage this smallholder investment. Every contract includes price and performance bonuses and, although the nature of these vary between contract companies, they are designed to encourage productivity improvement. This study evaluates existing contract bonus systems in six major contract companies in Indonesia and their capacity to encourage investment in biosecurity. Results indicated that the price bonus plays a significant role in providing additional smallholder income. If higher than expected sale prices are obtained, contracts with companies 3, 5 and 6 ensure that a greater proportion of this price is passed on to smallholders. Contracts 2, 4, and 6 provide farmers with higher performance bonuses, indicating that these companies encourage farmers to improve production efficiency. Overall estimates after the initial year of biosecurity investment show improvements in returns, where farmers can receive up to USD 2.73 for every dollar invested in biosecurity.