Economic analysis of traditional duck farmer’s household in Minahasa Regency North Sulawesi, Indonesia

S P Pangemanan, B Hartono¹, S Devadoss², L W Sondakh³ and B Ali²

Postgraduate Program of Animal Science, Faculty of Animal Husbandry, University of Brawijaya, Indonesia
peters easy@yahoo.com
¹Department of Socio-Economic, Faculty of Animal Husbandry, University of Brawijaya, Indonesia
²Agricultural Economic and Rural Socilogy Department. College of Agricultural and Life Science University of Idaho, United States
³Department of Socio-Economic, Faculty of Animal Husbandry, University of Sam Ratulangi, Indonesia

Abstract

This study describes the economic situation of duck breeders’ households under traditional rearing system in relation to decision making in production, time use allocation, income and consumption. The objective of the study was to observe the duck business contribution to the family income and the relationship of factors affecting the economy of the duck farmer’s family. This study was carried out in Minahasa regency, North Sulawesi, with focus on 5 districts of high duck populations. The study used a survey method collecting data through interviews, questioner, and from related services/institutions. A hundred duck farmer households were selected using purposive method sampling. Data were analysed using descriptive statistics and econometric modeling.

The duck farm business, based upon the revenue structure of the farmer’s family, gave the highest contribution. The effect of economic factors of duck farmer’s family indicated that duck farming under traditional system influenced the labor allocation and the production cost which would eventually affect the egg production, the duck business income, the family income, the consumption and the family savings.

Keywords: family, income, production, traiditional rearing system

Introduction

Livestock subsector development in Indonesia is one of the national development policies in agricultural sector, in which main objective of the livestock subsector development is to increase farmer community prosperity and to fulfill the community needs for food consumption and nutrition from the livestock product. Other objective is to solve problems relating with job opportunity, foreign exchange from the livestock product exports to foreign countries, encouragement to development of industrial sector and utilization of regional natural resources potency. The contribution of the livestock subsector to national revenue is indicated with the increased Gross Domestic Product of livestock subsector from 1999 to 2004 as much as 47.3% and it increased in 2006 as much as 20.5% (Indonesian agricultural Statistic 2009). This fact reflects that the livestock subsector is very high potential to become a development source in agricultural sector.

One of the challenges in the livestock subsector development in Indonesia is that the livestock business is still mostly conducted in the rural areas by local farmers in small scale with low number of livestock for family need or sale, and performed in traditional way (Soejana 2005). The objective of livestock development in Indonesia is to raise the economy of local people’s livestock farming to be a developed farming business. One of the livestock reared traditionally in North Sulawesi is duck. The duck products, like eggs and meat, benefit for food and nutrition fulfillment of North Sulawesi people. Ducks have become farmer’s commodity as one of the income sources beside other farm incomes. Duck farming in North Sulawesi Province is growing well in the areas of Minahasa Regency (North Sulawesi Central Bureau of Statistic 2011) which possesses natural resources potency appropriate for the livestock development and this farming has long been developed particularly around the bank of Tondano Lake with an area of 4,620 ha and rice fields of 13,002 ha. The duck farming uses a traditional system utilizing local natural resources as food resources existing lake, swamp, rivers and rice field (Polakitan et al 2006).

Duck business in this area is generally small-scale with average ownership of 165 ducks. The farmers manage the farm based upon their hereditary farming experiences with minimum use of duck rearing technology, such as the use of traditional local feed, free-range system, simple cage, no livestock drug use, and the use of local duck. The rearing system using Shepherd rearing system is done by moving around searching for new areas after paddy harvest as shepherding area, and it could go very far from their residence and sometime when they do not find sheperding area, they use intensive system. Such conditions result in low duck egg productivity (Setioko 1984) and low farmer’s income since they are highly dependent upon the nature (Ismoyowati and Suswoyo 2011).

Research in duck farming development generally studies the farmer’s characteristic and socio-economics (Pervin et al 2013, Khanum et al 2005, Gajendran and Karthickeyan 2009, Ugbomeh 2002, Gosh et al 2012, Chang and Villano 2008) and the duck production development through technological utilization (Kumar et al 2009, Paat et al 2001, Setioko et al 2000). In this study, the duck farmer development effort was observed not only from production aspect but also the household economic approach based upon the duck farming business managed by the family as a unit working as producer or consumer. The target of the livestock subsector development in this study was farmer’s households, particularly those who still continue doing traditional rearing system in Minahasa Regency, so that the questions in this study whether the traditional system of duck business can support household income? These systems need to be developed or replaced? Therefore, this study was aimed to know the duck business contribution to the family income and to observe factors affecting the household’s economic behavior. The goal of the present study is to provide new information that can be used to design livestock development policies, particularly duck business development.

Household economic model of traditional duck farmer

As a basis of the study, we took the fundamental explanation of the household economic theory, such as Chayanov (Ellis 1988), time allocation of Becker (1965), Barnum and Squire (Ellis 1988) and household concept of Low (Ellis 1988), in which farmer’s household is taken as an integrated unit of production decisions, income, employment and consumption output that aim to maximize utility with limited available resources.

In this study we made a model of household economy of traditional duck farmers (Singh et al 1986) to observe the relationship among economic factors of the household to be able to answer the research conclusion. Looking at the different features of the farm business of the duck farmers in this study, the duck farmers consume part of their duck business production, such as egg and meat, harvest beyond the duck business, such as paddy and maize, and use goods and services bought in the market as food and non-food. Besides that, they also spend their time for leisure so that the household utility function becomes:

Utility Function: U = U (Xe, Xm, Xc, Xn, Xl)

Maximizing the household utility function faces family income constraint. Family income of the duck farmers comes from egg and duck selling, agricultural product selling, off-farm wages, wages outside the agricultural sector. Assume that all income is spent for market goods, the equation becomes:

PnXn = Pe (E – Xe) + Pm (M - Xm) + Pc (C – Xc) – w (L – F)

Where:

w ( L – F ) = w(L – T + Xl) = wL – wT -wXl

Duck farmers, in maximizing the household utility function, face the time constraint. Time for the family is allocated for recreation, farming work, off-farm work and non-farm. Time constraint can be formulated as follows:

Xl + F = T, Where: F = T - Xl

Other constraint to maximize the household utility is production. There are 3 production constraints:

- Egg Production = E = E ( Le )

- Meat Production = M = M ( Lm )

- Crop Production = C = C ( Lc, A )

The three constraints are substituted in one constraint with the following equation:

PnXn + PeXe + PmXm + PcXc + w Xl = wT + π

Where:

π = Pe E (Le) + Pm M (Lm) + Pc C (Lc,A) - weLe - wmLm - wcLc – RA

If the household utility function is maximized with constraints of income, time and production, the Lagrangian function is formulated as follows:

£ = U ( Xe, Xm, Xc, Xn, Xl ) + λ [ wT + Pe E (Le) + Pm M(Lm) + Pc C(Lc,A) – weLe -wmLm - wcLc – RA – PnXn – PeXe - PmXm - PcXc - w Xl ]

Note:

In these equations, the household can choose the levels of consumption for the commodities and the total labor input into agricultural production

First order condition

= [wT+Pe E (Le)+Pm M(Lm)+Pc C(Lc,A)– weLe - wmLm - wcLc - RA – PnXn –PeXe -PmXm - PcXc - w Xl ] = 0

We solve the above system of equation simultaneously to obtain the solution for Xe, Le, Xm, Lm, Xc, Lc, Xl, Xn, A.These variables are function of Pe, Pm, Pc, Pn, we, wm, wc, wl, wn, R

Methods

Study Site

This study was carried out in Minahasa regency, North Sulawesi Indonesia. Minahasa regency size is about 1,029,82 km² and its geographic location is 01° 01’00” North Latitude and 01°29’00” East Longitude. Topography of this region covers of mountains. Below these mountains are the lowlands like Tondano and has a lake named Tondano with an area of 4,278 ha. The duck farmers live in this place with area of rice fields and swamps. As a tropical climate region, Minahasa only knows two seasons, i.e dry season and wet season

Data Collection

Minahasa regency, North Sulawesi, purposively sampled under consideration that this area is the largest duck livestock production centre with the highest duck livestock population (North Sulawesi Central Bureau of Statistic 2011). Five districts, South Tondano, East Tondano, Remboken, Kakas and East Langowan, were purposively selected due to their high duck populations. The number of samples of this research is 100 duck farmers by purposive sampling. Purposive sampling is used by reason of duck farmers are using sheperd system and have a minimum of 100 head of duck.

The data collected in this research consist of primary and secondary data. The primary data were collected using survey method by questionaire and in dept interview to respondent. The secondary data were obtained from Animal Husbandry Service office, the provincial statistic office, the regency statistic office, sub-distric office, agricultural, animal husbandry and forestry extension centers as well as other related institutions

Data Analysis

The duck farmer’s household characteristic data were analyzed using descriptive analysis which describes the profile of duck farmer households. The household economic model including production, time allocation, income and expenses, was further analyzed using a simultaneous equation. The economic model of the duck farmer’s family was specified as follows:

PTI = a0 + a1 JIP + a2 CTKI + μi (1)

CTKI = b0+ b1JTI + b2JBG + b3TKOF + b4TKUT + b5TKNUT + μi (2)

BPUI = c0 + c1PRT + c2BPI + c3JBG + c4JTI + c5CTKI + μI (3)

BPI = d0 + d1JTI + d2KNP + μi (4)

PRT = PUI + PUT + PDOF + PNUT (5)

PUI = NTI + NJID + NJTI - BPUI (6)

NTI = e0 + e1JTI+ μi (7)

NJTI = PTI x HT (8)

NJID = f0 + f1JIP + f2HI + μi (9)

PUT = g0 + g1INV + g2 BPUT + μI (10)

PNUT = h0 + h1PFO + h2TKNUT + h3PDOF + μi (11)

KRT = KPP + KPNP + KNP (12)

KPNP = i0 + i1KNP + i2PDKES + i3PRT + μI (13)

KPP = j0 + j1JART + j2PFO + j3PRT + μI (14)

KNP = k0 + k1INV + k2BL + k3BSR + k4PEST + μI (15)

TAB = l0 + l1LHN + l2KRT + l3PRT + μI (16)

Note:

PTI = Egg production (eggs /year)

CTKI = Labor flows of the duck business (man days/year)

BPUI = Production cost of the duck business (IDR/year)

BPI = Feed cost (IDR/year)

PRT = Family income (IDR/year)

PUI = Duck business revenue (IDR/year)

NTI = Unsold duck value (IDR/year)

NJTI = Egg selling value (IDR/year)

NIJD = Duck selling value (IDR/year)

PUT = Income from farm business (IDR/year)

PNUT = Income from non-farm business (IDR/year)

KRT = Total cost of household consumption (IDR/year)

KPP = Food basic consumption cost (IDR/year)

KPNP = Non-food basic consumption cost (IDR/year)

KNP = Non-basic consumption (IDR/year)

TAB = Family savings (IDR/year)

JTI = Number of ducks (head /year)

JBG = Length of raising time (month)

PFO = Formal education (years)

LHN = Agricultural land (hectare)

HI = Duck selling price, (IDR/year)

HT = Egg selling price (IDR/year)

PDOF = Income from off-farm activity (IDR/year)

TKUT = Labor flows for agriculture (man days/year)

TKNUT = Non-farm labor flows (man days/year)

TKOF = Off-farm labor flows (man days/year)

JART = Number of family members (person)

JIP = Number of Hens (Tail/year)

PDKES = Education and health costs (IDR/year)

BSR = Social life cost (IDR/year)

PEST = Family gathering cost (IDR/year)

BL = Other family cost (IDR/year)

INV = Investment for food plants (IDR/year)

Model identification used the order condition for structural model identification. The requirement for an equation to be identified was if number of variables not included in the equation, but included in other equation is at least similar to number of equations in the simultaneous equation model minus 1 (Gujarati 2003). Three forms of model identification are:

Order condition:

(K-M) < (G-1) = under indentified

(K-M) = (G-1) = exactly indentified

(K-M) > (G-1) = Over indentified

Where:

G = Endogenous Variable

Exogenous Variable

K = Endogenous variable + predetermined

M = Number of variables on the equation

Model identification (Table 1) shows that all equations were identified as over indentified, and therefore, the correct model used was Two Stage Least Square (2SLS). The analysis used version 9.1.3 SAS program.

The model equation test used the determination coefficient (R²), F test and t test. The determination coefficient (R²) value was used to determine the exact rate in model which was applied to explain the exogenous variable or the percentage of endogenous variable explained by the exogenous variable using regression model. F test was used to examine the model fit and the simultaneous effect of independent variables on the dependent variable, while the t test was used for partial independent variable test.

Results and Discussion

Household’s characteristic

The result household characteristic (Table 2) shows that mean land occupancy of the duck farmers in Minahasa regency was 0.576 Ha. It supports Wantasen (2012) that the farm land in Minahasa regency is narrow because system of land inheritance in the family resulting in widespread ownership of land each family becomes narrower.

The result also exhibits that 74% of the land occupancy was rental land or profit share land and 27% was private property. It means that the duck farmers in Minahasa regency have capital limitation to buy land or run the farm and therefore they have to do it through rental system or profit sharing. The duck farmers generally used the land for food plant plantation, such as rice and maize (Waleleng 2000). On age basis, the duck farmers were evenly 47.98 years old, with 80% of productive age category respondents and the rest 20% of non-productive category (productive age according to Central Bureau Statistic 2011 ranges from 15 to 65 years old). The result closer with Pervin et al (2013) about 85.5% of productive age in coastal area Bangladesh. The productive age shows that the family members are potential for supporting the family. It also indicates that the ability of the duck farmers to do their business mostly rely on their physical strength. The formal education of the duck farmers could be categorized as low or equivalent to secondary school level. It could result from low economic ability in the past in which education was not prioritized and most of the time spent to help their parents. The result similar with Ageyekum et al (2010), Dinesh et al (2009), Gosh et al (2012) in case of education in devoloping countries. The education outside the formal school helps the farmers increase their business through farming experiences derived from the elderly, counseling and information sharing among the farmers. Mean number of duck famer’s family members was 3.42 people. Indonesian statistic (2010) found an average of 4.0 members/family meaning that there was low number of family members in duck business consisting of father, mother and children (Central Bureau Statistic 2011). It could result from that the adults (productive age) did their own business, then got married, and lived as separate family causing the farmer’s family members decrease. Dinesh et al (2009), found members family in kamboja was 5 people, similar with Alfred and Agbede (2012) in Nigeria. Moreover, farming experience was evenly 10.84 years indicating that the farmers have had good experiences derived from parents so that they have good farming knowledge and capability. The result closer with Agyekum et al (2010) about 10,52 years in Ghana but in Nigeria and Philipine were founded less than 10 years (Alfred and Agbede 2011; Chang and Vilano 2008). Mean duck livestock ownership was 166 ducks per farmer is consisting 73%, 18% and 9% for small, medium, and large scaled business, respectively. The results obtained are smaller than the results of the study Ismoyowati and Suswoyo (2011) in two regencies in West Jawa Indonesia. It reflects that the duck farmers in this regency belong to small-scaled business category due to capital limitation for business development.

Traditional Duck Business Contribution to Duck Farmer’s Family Income

Results in Table 3 indicate that duck farmer’s family income comes from four sources. These sources give income contribution as much as 72.% from duck business, 13% from farming outside the duck business, 10% from non-farm business, and 5 % from off-farm income, respectively. This reflects that duck business is a major business giving the highest income contribution to the family.

Duck business income is difference between business gain and production cost over a year. The traditional duck business is obtained from gains of egg selling, duck selling and duck livestock reared value until the time the study was done (Table 4).

Table 4 shows that profit from egg selling gives the highest contribution, followed by the duck livestock value, and duck selling value, respectively, which means that traditional duck business is intended to produce eggs. Duck selling was only conducted when the duck produced less and less number of eggs and removed. In addition, duck selling occurred also for males as a result of duck layer selection at the age of 5-6 months.

Relationship of factors affecting the duck farmer’s family economy under traditional system

For the analysis of simultaneous factors influencing the economy of traditional duck farmer’s family (Table 5), the result shows that egg production is highly significantly influenced by number of layer ducks. An individual layer duck could produce 140-250 eggs per year so that number layer duck would be highly important to maintain that the egg production could be stable. Thus, for egg production development, the farmers should also add more layer duck that more layer duck would produce more eggs.

Family labor of the duck business is highly significantly affected by number of duck livestock and number of shepherding months. Number of ducks significantly affects the family labors since the more ducks reared the more labor flows needed to control the ducks. Excessive number of ducks is limited by the individual capability of handling the duck flock, since a person is only able to take care of 250-300 ducks at the most. Therefore, the extra number of ducks was usually handled by other member in the family or labor outside the family. Number of shepherding months indicates that increase in their time length for shepherding as a result of new shepherding location encounter or wider shepherd land will augment the labor flows of the duck business.

Furthermore, the production cost is highly significantly affected by feed cost, number of duck livestock, and labor flow. For feed cost, the shepherd system has to need the feed cost since the duck livestock certainly need additional feed to support the duck productivity in egg production. For number of ducks, more ducks reared will augment the production cost, such as feed cost, labor cost and other costs. For labor flow, higher number of ducks will raise the labor cost of the family and eventually the production cost.

Duck feed cost is highly significantly influenced by number of duck livestock. The egg duck requires sufficient nutrition to produce eggs, and hence the farmers, despite reared under a shepherd system, keep fulfilling the nutrition by feeding maize as energy source and lake snails as protein source and concentrate for duck seedling growth so that it is logical that the more the duck livestock the more the feed needed, and the higher the feed cost will be.

Duck selling value is highly significantly affected by number of layer duck and duck price. The layer ducks of low egg production will be immediately culled and sold. If number of culled ducks is large, the selling duck value will be high. The duck price in the market highly affects the duck selling value as well. In certain occasion, such as religious holidays, the selling price will be high due to high demand for duck meat.

Duck livestock value is highly significantly influenced by number of ducks. It was total value of the livestock owned at the time of data sampling so that it was logical if the higher the number of ducks the higher the duck value. Controlling the livestock in the shepherd area should be the important actions to do that the number of livestock will not decrease from mortality caused by disease, predation by other animals and theft.

The income from non-duck farm business is highly significantly influenced by the farm production cost. Increase in farm production will occur if the production cost is carefully spent. This becomes a strong reason since the farmers often used incorrect technology in running the farm and consequently the production cost could be inappropriately high. Hence, increase in production cost should follow the recommended technology to obtain maximum production and higher income of non-duck farm business.

Non-farm income is highly significantly affected by labor flows of the non-farm business. It showed that the higher the labor flows of the non-farm business, the higher the income of the non-farm business. In a family, wife and children had big opportunities to support the family income by doing something else, such as shop, civil employee and others. It was in line with formal education background owned by the family members.

Non-food basic consumption is highly significantly influenced by the family income. It showed that the income was used not only for food basic expenditures, but also more for non-food basic expenditures, such as cloth, house, and education as a very essential need for the family. However, the non basic consumption negatively highly influences the non-food basic consumption, such as social religious, social gathering and others. It reflects that environmental factors, such as tradition and social status, often affect the spending patterns of the family that eventually gives more attention to the non-basic consumption.

Food basic consumption is highly significantly affected by number of family members and family income, reflecting that food basic consumption is an essential expenditure of the family prioritized so that increase in family income tends to be utilized to raise the quantity and quality of food materials consumed, and it also indicates that the more the family members the higher the food basic consumption expenditures.

Non basic consumption is significantly affected by other costs. These cover woman’s need and recreation. Family recreation is often done to get some refreshment from work. It could be going to the city, visiting the relative and going to recreational places.

Finally, savings are negatively significantly influenced by the family consumption indicating that family consumption is put before the savings, such as food need. Family income significantly affects the savings meaning that not all family income is spent for consumption but some is saved through family gathering or organization.

Conclusion

• The study concluded that duck farm business, based upon the revenue structure of the farmer’s family, gave the highest contribution. This contribution shows that traditional duck business suggested to be developed as an one attempt alternative to meet the needs of family life as well as commercial
  
  
• The effect of economic factors of duck farmer’s household indicated that duck farming under shepherd system influenced the labor allocation and the production cost which would eventually affect the egg production, the duck business income, the household income, consumption and the savings. Recommendation of this study is to optimize the impact of factors that greatly affect the household economy duck farmers through government programs in the use of breeding technology : hatchery and superior duck to increase the number of duck layer ownership and quality of duck egg. In addition, increase farm investment outside the duck business will increase the household income.

Acknowledgement

The authors are grateful for facilitating and collaborative help by Agricultural Economic and Rural Sociology (AERS) Department, College of Agricultural and Life Sciences(CALS), University of Idaho in Sandwich-like Program 2013. Special thanks to Dr. Cathy A Roheim and Dr.Robert B. Haggerty (AERS)

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Received 29 May 2014; Accepted 25 June 2014; Published 1 July 2014

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