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Financial risks in Rwandan smallholder broiler production

Bartholemew Kenner (Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, Tennessee, USA)
Dayton M. Lambert (Department of Agricultural Economics, Oklahoma State University, Stillwater, Oklahoma, USA)
Carlos Omar Trejo-Pech (Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, Tennessee, USA)
Jada M. Thompson (Department of Agricultural and Resource Economics, University of Tennessee, Knoxville, Tennessee, USA)
Thomas Gill (Smith Center for International Sustainable Agriculture, University of Tennessee, Knoxville, Tennessee, USA)

Journal of Agribusiness in Developing and Emerging Economies

ISSN: 2044-0839

Article publication date: 14 October 2019

271

Abstract

Purpose

The purpose of this paper is to determine the stochastic net present value (NPV) of a model smallholder poultry operation in Rwanda under production and market uncertainty.

Design/methodology/approach

A discounted cash flow calculator was used to determine the NPV of operator investments and operating cash flows, including time, materials and capital. Broiler production data, market prices and variable input costs were collected from 125 smallholder operations in the Musanze District, Rwanda. These data were combined with a historical price index tracking the inflation rate of Rwanda’s currency. Policies including overstocking, technical support repayment scheduling, selling broilers at a spot market price, using marketing contracts and selling poultry manure were compared using non-parametric paired comparisons and stochastic dominance.

Findings

Risk-neutral and risk-averse producers would prefer overstocking, delaying repayment of technical support services and selling manure to status quo operational policy. No differences were observed between the option to sell birds at spot market prices or through contracts.

Research limitations/implications

This analysis demonstrates how individual managerial or an intervention in smallholder broiler production affects financial performance.

Practical implications

To mitigate risk associated with this novel enterprise, producers should consider overstocking birds. If local markets for manure were developed, the risks faced by new or beginning poultry operators could be mitigated.

Originality/value

A stochastic, discounted cash flow model calculator was used to determine the NPV and discounted payback period of operator investments and operating cash flows, including time, materials and capital.

Keywords

Acknowledgements

This research was supported by the United States Agency for International Development Grant No. AID-696-A-17-0006. The views expressed in this paper are those of the authors.

Citation

Kenner, B., Lambert, D.M., Trejo-Pech, C.O., Thompson, J.M. and Gill, T. (2019), "Financial risks in Rwandan smallholder broiler production", Journal of Agribusiness in Developing and Emerging Economies, Vol. 9 No. 5, pp. 569-583. https://doi.org/10.1108/JADEE-11-2018-0163

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited

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