Agroindustrial project analysi

100 AGROINDUSTRIAL PROJECT ANALYSISto the lower-income segments of the population. The high retailprices of broiling chickens led the government to contemplateinstituting price controls on poultry meat to eliminate excessiveprofits to processors. But, when the policymakers traced the costcomponents from retailer to processor to poultry farmer, theyfound that processors' profit margins were not excessive and thatthe primary cost factor was poultry feed (see table 3-6). Takingthe analysis further, they found that the feed mills were also operatingon thin profit margins and that the real source of the highcost of feed was the high, prevailing support price for feed grains,which the government itself maintained. Given the economic dominanceof this raw material in the industry, high prices at the endof the chain were inevitable. Yet the high support prices were notstimulants effective enough to increase grain output. This suggeststhat there were other production constraints, such as inadequateTable 3-6. Illustrative Cost Structurefor Broiler Chicken Agroindustryin an African Country, 1973(U.S. dollars)Cost perItem chicken PercentageRetailingRetail price 3.24 100.0Markup 0.25 7.6ProcessingDressing 0.20 6.1Packaging 0.05 1.5Distribution 0.10 3.0General and administration 0.15 4.6Profit margin 0.15 4.6GrowingIncubated chicks 0.20 6.1Feed 1.80 54.7Disease control 0.05 1.5Mortality 0.05 1.5Maintenance 0.04 1.2Transport 0.10 3.0Profit margin 0.15 4.6Source: Author estimate based on unpublished industry studies.