V. Data and Surveys

5.1 Sample Location and its Characteristics

Three regions were selected in Brazil, each with the following characteristics:

i. South - This region includes the sates of Rio Grande do Sul (RS), Santa Catarina (SC) and Paraná (PR). It represents the traditional grain, meat and milk areas, including both small and medium-sized farms. Livestock industries located in the South represent a large share of the sector.

ii. Southeast - São Paulo (SP), Minas Gerais MG), Rio de Janeiro (RJ) and Espírito Santo (ES) are included in the Southeast. It is the richest and most industrialized area of the country. Regarding the agricultural sector, this region is no longer an important grain production area. It concentrates the production of sugar cane and orange, particularly in São Paulo, and other agricultural products in Minas Gerais. In peripheral areas, milk, beef and eggs are still produced. The Southeast imports grains from other regions, especially the Central West.

iii. Center West - The states of Mato Grosso (MT), Mato Grosso do Sul (MS) and Goiás (GO) form the central west region of Brazil. It is characterized by a low population density and a great expansion potential for crops and animal production. It is the area where agriculture grows at the highest rate in Brazil. It is the area with highest export of food. Grain production and cattle ranching predominates in the central west region.

5.1.1 Sample Size and Composition

i. The broiler survey was based on a sample of 235 farms. Table 5.1 indicates the sample composition according to the lodging capacity. Only 6 farmers in the sample did not produced under contract. Observed contracts were similar in conception.

ii. The hogs survey considered a sample of 193 farms distributed over the states of Goiás,.Minas Gerais, Mato Grosso do Sul, Mato Grosso, Paraná, Rio Grande do Sul and Santa Catarina. The samples were stratified according to the number of parents, following the methodology defined by Brazilian Institute of Geography and Statistics (IBGE). The producers were divided into three groups: integrated (contracted by the companies), integrated (member of cooperatives) and independent.

Table 5.2 indicates that 51% of swine growers in the sample produced under contract; 30% operated independently and 19% were cooperatives.

Table 5.1 Number of producers per state and lodging capacity

Source: Research data

Table 5.2 Numbers of sample farmer according to the production system

Source: Research data

According to Table 5.3, almost have of the small-scale swine producers (less than 200 sows) are integrated and about a third are independent. The proportions of integrated and independent producers in the next stratum (200-600 sows) are the equal (41.7%). One half of the largest farmers (more than 1200 sows) are independent.

Table 5.3 Characteristics of farmer production system for numbers of Sows

Source: Research data

Three types of production systems were included in the sample, as shown in Table 5.4. In Minas Gerais, Paraná, Rio Grande do Sul e Santa Catarina, swine production is dominated by the complete-cycle system. In Mato Grosso and Mato Grosso do Sul growers are predominantly finishers, but farmers producing under the complete system are also expressive in number. The production of piglets only dominates in Goiás but is relevant in Rio Grande do Sul and Santa Catarina as well.

Table 5.4 Swine production system by state

Source: Research data

iii. The sample of dairy farmers included 160 producers according to the production distribution of IBGE. The selected states represent 76 % of the milk production in Brazil.

Table 5.5. Numbers of sample dairy farmers by state

Source: Research data.

Small-scale dairy farmers (less than 500 liters/day) are expressive in Rio Grande do Sul and Santa Catarina. See Table 5.6. In Paraná, São Paulo, Minas Gerais and Goiás, larger farms dominate. Small-scale farms employ predominantly family labor in the South. In Goiás, to a higher degree, and São Paulo and Minas Gerais, small-scale farms are based on hired labor. Larger farms use mainly hired labor as expected.

Table 5.6 Size distribution and labor categories of the sample farmers.

Source: Research data.

iv. The size of the sample of egg producers was 89 distributed among states according to data from IBGE. Small-scale farmers predominate in the sample.

Table 5.7 Sample of Egg Producers

Source: Research data

5.1.2 Rationale for Size Category

The basis for the sample stratification followed the standards indicated by IBGE. However, the original layers were added in a way to compose groups that could be identified according to the number of animals and that could be related to the different production systems found in the field work.

Smallholder: According to the 1996 Agriculture Census, informal scale production has practically disappeared. As a rule, it has become cheaper the acquisition of the product in the market than its "backyard" production. Also, although municipal health and environment regulations vary according to the city administration, in general animal growing is forbidden within urban areas. Thus, small farms were defined in a way to compose a group of producers with a minimum commercial production scale.

• Hogs: 0-200 saws. In this group, the complete cycle producers of the South region predominate and family labor is used. In the region, we can still find the so-called "condominiums", that is, groups of small producers who get together to form a hogs production unit, which supply inputs to its associates, making hogs production costs compatible with that of large production scale groups.

• Broiler: 4001 to 16,000 birds of inventory. This type of production is predominant in Southern Brazil. Companies and cooperatives adopt the minimum size of 6000 birds for the contract. Producers with a lower number of birds were not found in the field survey in of the areas; that information was checked with official extension organizations.

• Dairy: from 200 to 500 liters by day. IBGE still identifies the existence of smaller producers in the 1996 Census. However, the selection process the sector has gone through in the last few years has elevated scale production. The search for productions of less than 200 liters per day was little productive, even in the south area. This module comprises economically viable producers in terms of production transportation.

• Layers: up to 50000 birds. The highest concentration of this type of producer is in the State of Paraná, where aviculture is a traditional activity. In the states of São Paulo and Minas Gerais, larger producers can be found, with over 500000 birds.

Medium-scale Operations

• Hogs 200 to 600 saws and 600 to 1200 saws - most Brazilian producers are in this layer.

  • The group was divided in two: the 200- 600 saws group operates mostly in a independent system production with a great amount of family labor; the group with 600 to 1200 saw is formed by integrated production growers.

• Hogs: less than 1200 saws. LARGE SCALE.

  • Are mostly in the Central West region of the country and act independently.

  • Broiler: 16,000 to 60000 birds of inventory.

    • Size considered ideal by southern integrators, but small or medium-sized in the Midwest.<

  • Broiler: more than 60000 birds of inventory.

  • Producers of this size can be found in the areas of Rio Verde/GO and Uberlândia /MG. Two areas of more recent avicultural activities located in na área of a large grain production.

  • Dairy: more than 500 liters/day.

    • Predominant in the states of SP, MG, GO and RS. Uses mainly hired labor.

  • Layers: 50000 to 200000, 20000 to 500000 and over 500000.

    • All of theses groups have a single economic logic. They have a good capability for input acquisition and production commercialization. They are situated mainly in the states of MG and SP.

• Timing and extent of surveys - October - January.

i. Broiler:
ii. Hogs:
iii. Dairy:
iv. Layer:

N.B.: Scope of production period:

¨ For production patterns in defined cycles: the LAST production cycle

¨ For production patterns with no defined cycles (e.g., overlapping batches of Farrow-to-Finish operations): Input-output performance in the month of October 2002.

• Problems encountered

Broiler

• Difficulty in finding independent broiler operations (prevalence of contract production and commercial operations).

ii. Hogs, layers:

• Producers are going through a difficult moment and were not willing to talk about the production.

iii. Layers:

• The producers form closed and hard-to-approach groups. The strategy adopted to break the ice was to contact unions and the name of the university. The contact was done by Japanese descendant members and some times the use of the Japanese language was necessary.

iv. Broiler, Hogs, Dairy

• A work with the integrator companies and cooperatives was necessary so that they would not show resistance to the work. At the same time, associations and unions weree contacted in order to obtain non-biased samples.

v. Logistics

• Poultry: 17000 km.

• Hog: 22000 km.

• Dairy: 13000km.

• Layers: 6000km.

• The access to farms through municipal, state and federal roads has problems in rainy days, especially due to the rainy period in December and January.

5.2 How Data was handled and Variables Constructed.

The information collected through the field surveys were used to construct the variables needed for estimation of the profit function frontiers. Four equations were defined: one for broiler, one for swine, one for dairy and another one for layers (or eggs). The dependent variable in all of them was profit per unit of output. The set of explanatory (RHS) variables were subdivided into two subsets: (a) the beta coefficient variables related to the profit function properly and the delta coefficient variables designed to explain the inefficiency of the farmers vis a vis the frontier function.

5.2.1 Broiler Equation

All broiler farms produces under contract, that is, all are integrated.

1) Dependent variable

Unit Profit = (Farm Gate Revenue - Variable Costs)/Broiler production (R$/kg)

Revenue = [(Net Revenue Received from Contractors) + (Manure Price (R$/t) X Amount of manure sold (t)) + (Price paid by integrator (R$) X on farm consumption(kg))].

Variable Cost = Hired labor cost + Electricity cost + Litter cost + Collecting and truck loading cost + Heating cost

Hired labor cost = [Hours worked X Labor cost (R$)/hour]

Electricity Cost = Price(R$/kw) X electricity consumption (kw)

Litter cost = Price(R$/t) X Amount used (t)

Collecting and truck loading cost = price (R$/ broiler) X number of broilers

Heating cost = [Price of butane(R$/kg) X Amount of butane(kg)) + (Price of wood (R$/m3) X Amount of Wood(m3) + (Price of coal (R$/m3) X Amount of coal(m3)].

2) Explanatory variables: beta coefficients variables

B1 - Feed conversion = Total consumption of feed (kg)/ Total broiler production (kg)

B4 - Price Hired labor = Labor cost (R$) /hour

B5 - Price of Electricity = Market Price (R$/ kw)

B7 - Price of Litter = Market price (R$/t)

B8 - Collecting and truck loading Price = Market price/broiler

B9 - Heating Price = R$/kcal.

B10 - Output Broiler Price = Farm gate price paid by integrator(R$/kg)

Fixed factors

B10 - Agricultural land = Land used for animal building.(m2/kg).

B11 - Family Labor = number of hours/output(kg)

B12 - Capital = Cost with depreciation of building and equipment (R$)/output(kg)

3) Determinants of Inefficiency: Delta coefficient variables

Educations and experience

D1 - Length of time decision maker in activity = Years

D2 - Level of education for decision maker = (1=none, 2=incomplete primary, 3=complete, primary, 4=incomplete secondary, 5=complete secondary, 6=incomplete college, 7= complete college, 8=post college).

D3 - Length of time decision maker in this farm = Years

Concentration

D4 - Animal concentration in regions = number of broilers in region/km2. The region is the official geographical area, to which the municipio belongs, defined by IBGE.

D5 - Animal concentration on the farm = number of broilers/m2 of farm area.

D6 - Environmental cost = manure collecting, storing and spreading costs

D7 - Distance of the city = km

Taxes

D9 - Taxes = (Farmer's union contribution) /output (kg).

Access to information

D10 - information index = sum of information channels dummies (radio, TV, Cable TV, internet, telephone, cell telephone, newspapers, magazines, information booklets).

States dummies

D11 - DummyPR = 1 for PR, 0 for others

D12 - DummyRS = 1 for RS, 0 for others

D13 - DummyMG = 1 for SC, 0 for others

D14 - DummyMS = 1 forMS, 0 for others

D15 - DummyMT = 1 for MT, 0 for others

D16 - DummyGO = 1 for GO, 0 for others.

D17-Scale variable = Output (kg). OK.

5.2.2 Layers equation

1) Dependent variable

Unit Profit = (Revenue - Variable Costs)/Egg production (boxes) = R$/box of 360 eggs.

Revenue = [(Sales price of the box with 360 eggs (R$/box) X output (boxes)) + (Sales price of manure(R$/t) X Amount manure sold or used (t) + (Sales price of box (R$/box)X self consumption of eggs (boxes) + (Amount of feed bags sold (kg)X price of bags (R$/kg))].

Variable Cost = Feed cost + Hired labor cost +Electricity cost + Freight cost

Feed cost = Sum of expenditures on each stage feed (R$)

Cost of hired labor = [Hours worked X labor cost (R$)/hour]

Cost of electricity = Electricity expenditure (R$)

Freight Cost = (R$/box) X Boxes sold

2) Explanatory variables: beta coefficient variables

B1 - Feed conversion = Total consumption of feed (kg)/ output (boxes)

B2 - Feed Price feed = Sum of expenditures on each stage feed (R$) / Total feed consumption (kg)

B3 - Price of hired labor = Labor cost (R$) /hour

B4 - Price of Electricity = R$/kw

B6 - Output price = Market price (R$/box)

Fixed factors

B10 - Agricultural land = Land used in the farm with agriculture area and pasture area (ha)/output (boxes)

B11 - Family labor = number of hours/output (boxes)

B12 - Capital = Cost with depreciation of building and equipment (R$)/output (boxes)

3) Determinants of Inefficiency: Delta coefficient variables

Educations and experience

D1 - Length of time decision maker in this farm = Years

D2 - Level of education for decision maker

D3 - Age of the decision maker = Years

D4 - Length of time decision maker in activity = Years

Concentration

D5 - Animal concentration in regions = number of layers in regions /km2

D6 - Animal concentration on the farm = number of layers/m2

D7 - Environmental cost = manure collecting, storing and spreading cost

D8 - Distance of the city = km

Access to information

D9 - information index - sum of information channel dummies

States dummies

D10 - DummySP = 1 for SP, 0 for others

D11 - DummyPR = 1 for PR, 0 for others

D12 - Output (boxes)

5.2.3 Swine equation

1) Dependent variable

Unit Profit = (Revenue - Variable Costs)/output (R$/kg)

Revenue = [(Sales price (R$/kg))X output(kg)

Variable Cost = Feed cost + Hired labor cost + Taxes +Electricity cost + Medicine cost + Input freight cost + Veterinarian cost + Output freight cost + Labor training cost + Other freight costs + Fuel cost + Environmental cost

Feed Cost = Sum of expenditures on each stage feed (R$)

Hired labor cost = Number of hours worked X labor cost/hour (R$)

Electricity cost = Electricity expenditure (R$)

Medicine cost = expenditure on medicines (R$)

Input freight cost = expenditure on input freight (R$)

Veterinarian cost = expenditure with veterinarian (R$)

Output freight cost = expenditure on output freight (R$)

Fuel cost = expenditure with fuel (R$)

Environmental cost = permit cost (R$)

2) Explanatory variables: beta coefficient variables

B1 - Feed conversion = Total consumption of feed (kg)/ output (kg)

B2 - price of feed = Sum of expenditures on each stage feed (R$)/Feed consumption (t)

B3 - Price of hired labor = Labor cost/hour

B4 - Electricity price = (R$/kw)

B7 - Veterinarian price = expenditure with veterinarian (R$)/month

B10 - Environmental price = permit cost (R$)/animal

B11 - Output price (R/kg)

B12 - Complete Cycle (1= Complete cycle or 0 = Others)

B13 - Independent - (1= Independent or 0 = Others)

B 14 - Integrated (1= Integrated or 0 = Others)

Fixed factors

B15 - Agricultural land = Land used in the farm with agriculture area and pasture area (ha)/output (kg)

B16 - Family labor = number of hours/output (kg)

B17 - Capital = Cost with depreciation of building and equipment (R$)/output (kg)

3) Determinants of Inefficiency: Delta - coefficient variables

Educations and experience

D1 - Length of time decision maker in this farm = Years

D2 - Level of education for decision maker

D3 - Age of the decision maker = Years

D4 - Length of time decision maker in activity = Years

Concentration

D5 - Animal concentration in regions = number of animals in region /km2

D6 - Animal concentration on the farm = number of animals/m2

D7 - Environmental cost = to be clarified

D8 - Distance of the city = km

D9 - Environmental cost = permit cost (R$)

D10 - Farm distance to nearest neighbor = km

Access to information

D11 - Information index = sum of information channels dummies

States dummies

D12 - DummySC - 1 for SC, 0 others

D13 - DummyPR - 1 for PR, 0 others

D14 - DummyMS - 1 for MS, 0 others

D15 - DummyMT - 1 for MT, 0 others

D16 - DummyGO - 1 for GO, 0 others

D17- DummyMG - 1 forRS, 0 others Changed to Dummy RS

D21- Output (kg)

5.2.4 Dairy Equation

1) Dependent variable

Unit Profit = (Revenue - Variable Costs)/output (R$/liter)

Revenue = [(Sales price (R$/liter)X output(liter)

Variable Costs = Humid feed cost + Dry feed cost + Pasture maintenance cost + Equipment maintenance cost + Medicine cost + Genetic cost + Electricity cost + Manager cost + Hired labor cost + Freight cost + Equipment maintenance cost (fencing costs included).

Humid feed cost = Humid feed expenditure (R$)

Dry feed cost = Dry feed expenditure (R$)

Pasture maintenance cost = Pasture maintenance expenditure (R$)

Equipment maintenance cost = Equipment maintenance expenditure (R$)

Medicine cost = medicine expenditure (R$)

Genetic cost = expenditure on semen and nitrogen (R$)

Electricity cost = electricity expenditure (R$)

Hired labor cost = Number of hours worked X labor cost/hour (R$/)

Equipment maintenance cost = Equipment maintenance expenditure (R$).

2) Explanatory variables: beta coefficient variables

B1 - Milk production by cow in lactation per day.

B2 - Humid feed price = Humid feed expenditure/kg of feed (R$)

B3 - Dry feed price = Dry feed expenditure/ kg of feed) (R$).

B6 - Medicine price = medicine expenditure (R$/animal)

B7 - Genetic price = expenditure on semen and nitrogen (R$/dose)

B8 - Electricity price = R$/kw

B10 - Hired labor price = Labor cost/hour (R$/hour)

B12 - Output price = R$/liter

B13 = membership of a cooperative: dummy = 1 if cooperative member.

Fixed factors

B13 - Agricultural land = Land used in the farm with agriculture area and pasture area (ha)/output (liter)

B14 - Family labor = number of hours/output (liter)

B15 - Capital = Cost with depreciation of building and equipment (R$)/output (liter)

B16 - Value of herd = working capital.

3) Determinants of inefficiency: delta coefficient variables

D1 - LAC - Duration of lactation in the farm (days)

D2 - EXPPROP - Experience in the activity (years)

D3 - DummyPROP - The manager is the proprietor (1), 0 otherwise

D4 - DummyFAM - The manager is member of the family(1), 0 otherwise

D5 - EXPMAN - Manager experience in the activity (years)

D6 - DUMMYRES - The proprietor resides in the farm (1), 0 otherwise

D7 -AGEMAN - Age of manager (years)

D8 - SCHOOLMAN - Manager schooling (years)

D9 - DUMMYTRAIN - The manager has had training in last 12 months (1), 0 otherwise

D10 - DIST - Distance between the farm and the city (km)

D11 - Index of information - sum of information channels points

D12 - Environmental Cost. Being included.

States dummies

D13 - DummyRS - 1 for RS, 0 others

D14- DummySC - 1 for SC, 0 others

D15 - DummyPR- 1 for PR, 0 others

D16 - DummySP - 1 for SP, 0 others

D17 - DummyMG -1 for MG, 0 others

D18 - Output (liters)

Locational maps of survey

Figure 5. 1 Poultry livestock distribution in Middle West region of Brazil - IBGE, 2001.

Figure 5. 2 Layers livestock distribution in the Midwest of Brazil - IBGE, 2001.

Figure 5. 3 Main producer regions, defined according to the milked-cows criteria.

Figure 5. 4 Swine livestock distribution in south and midwest of Brazil

Statistics

The statistics for variables is showing in Tables 5.8 to 5.9 for Broiler, Layer, Swine and Dairy model respectively.

Table 5.8 Statistics - Broiler model.

Fonte: CEPEA/ESALQ/USP
* Below is presented the measures of the variables.

Table 5.9 Statistics - Layer model.

Fonte: CEPEA/ESALQ/USP
* Below is presented the measures of the variables.

Table 5.10 Statistics - Swine model.

Fonte: CEPEA/ESALQ/USP
*Below is presented the measures of the variables.

Table 5.11 Statistics - Dairy model.

Fonte: CEPEA/ESALQ/USP
* Below is presented the measures of the variables.