Comparative Analysis of Contract Farming Effect on Technical Efficiency of Broiler Chicken Farms in Indonesia

Abstract

The development of broiler chicken farms in Indonesia has taken two forms, namely non-contract and contract farming. This study aimed to compare the technical efficiency levels of production in these two types of farming in Banten Province, Indonesia. Data were collected randomly from 180 broiler chicken farmers, consisting of 103 non-contract and 77 contract farmers. The study used the stochastic frontier production function to meet its objectives. The results showed that non-contract broiler chicken farmers were less efficient in their production than those under contract. The mean technical efficiency of the production factor for non-contract broiler chicken farmers was 0.689, ranging from 0.339 to 0.996. On the contrary, broiler chicken farmers under contract had a higher mean efficiency value of 0.893, ranging from 0.638 to 0.988. Moreover, the type of input supplier had a significant positive effect on technical inefficiency in non-contract farms. Non-contract farmers who purchased their production needs from a poultry shop showed higher technical efficiency compared to those who used distributors. This research sheds light on the efficiency of broiler chicken farms, both non-contract and contract, enabling all stakeholders, including the government, to devise appropriate policies for the development of broiler chicken farming. The study provided valuable insights into the technical efficiency levels of broiler chicken farming in Indonesia, which can help farmers identify areas that need improvement and develop strategies to increase productivity and profitability.