1. FACTORS AFFECTING FORWARD PRICING DECISIONS: EVIDENCE FROM INDIAN POULTRY SECTOR Research Concept Note D. Bardhan Asstt. Professor (Vety. Economics) Department of Veterinary & A.H. Extension College of Veterinary and Animal Sciences G.B.P.U.A & T, Pantnagar

2. Poultry Sector in India Poultry occupies a unique position in the livestock economy of India India ranks fourth in the world in egg production and eight in poultry meat production. Production and exports of poultry meat have experienced the highest growth rate in the last two decades among meat of all food animal species

3. Production growth rates of meat of food animal species Commodities1982-941995-20031982-2003 Buffalo meat2.990.902.51 Beef and Veal3.701.132.49 Mutton and lamb0.701.101.57 Goat meat2.910.601.73 Pig meat4.282.983.97 Poultry meat14.7668.6820.59

4. Export growth rates of meat of food animal species Commodities1982-941995-20031982-2003 Buffalo meat4.8916.1012.89 Beef and Veal96.29-27.4262.67 Mutton and lamb-3.14-6.81-6.25 Goat meat12.66-23.0420.65 Pig meat--22.16- Poultry meat20.766.9620.36

5. Changes in food consumption patterns  Boost in demand of poultry products: Sustained increase in per capita income and household purchasing power and urbanization Increase in consciousness of health related attributes of poultry meat as compared to red meat  The distinct increase in the demand for poultry food products not only contributes to nutritional security, but also provides income growth opportunities for millions of small-scale poultry producers

6. Per capita consumption of different food commodities (Kg/capita/year) and their annual compound growth rates Commodities IndiaDeveloped CountriesDeveloping Countries 19702003Growth rate 19702003Growth rate 19702003Growth rate Bovine meat2.32.40.4826.122.3-0.74.36.21.38 Mutton and goat meat 0.70.60.203.32.1-1.151.21.81.55 Pig meat0.30.51.4023.329.10.353.712.03.93 Poultry meat0.21.67.5010.225.52.751.58.35.69 Meat3.65.21.2764.680.30.4511.2293.23 Eggs0.51.84.0312.8 -0.261.87.54.85 Milk32.068.02.38188.3201.70.1328.448.41.56 Rice67.871.10.6211.611.5-0.1465.165.70.25 Wheat35.763.61.68101.698.4-0.0138.558.61.38 Total cereals151.2159.00.35136.9131.2-0.07146.9156.10.35 Total pulses17.611.7-0.863.52.9-0.319.47.0-0.94 Vegetables43.068.61.2497.8115.20.4244.2118.73.04 Fruits25.137.71.5069.187.00.6233.655.41.69

7. New Challenges and Opportunities  The liberalization and globalization era brought about new challenges and opportunities for the poultry sector large-scale private players in processing and marketing of poultry products Quality consciousness Value added poultry products Supply chain management

8. Critical Issues Lack of remunerative prices and vulnerability to price risks Recent interest in promoting use of institutional markets, such as futures and forward contract markets Although, forward contracting in poultry marketing has been prevalent in some areas of the country, scant attention has been paid till now to assess the scope and feasibility of futures market

9. RESEARCH PROBLEM  Forward pricing in poultry sector will be effective only if: its institutional mechanism assures price stability and the poultry producers are willing to participate in it.

10.  The proposed research study addresses the second issue as acceptance of forward pricing by producers is critical and constitutes an important area of research inquiry as regards to its potential implications  The finding of the study would provide valuable insights for policy designing in regard to poultry marketing.

11. OBJECTIVES OF THE STUDY The study aims to investigate: the present marketing behaviour of the poultry producers the factors that influence the producers’ choice of forward pricing methods, viz. forward contracts and futures markets.

12. RESEARCH METHODOLOGY

13. Study Area U.S. Nagar and Nainital districts which lie in the Tarai and Bhavar regions, respectively of Uttarakhand (account more than 60 per cent of the state’s poultry population ) The poultry farmers will be classified on the basis of production systems and scale of operation and then appropriate number of farmers will be selected from each category on proportionate basis.

14. Contingent Valuation The proposed study aims to evaluate the contingent behaviour of the poultry producers in regard to their willingness to participate in futures market Contingent rather than actual behaviour is to be estimated, as different methods of forward pricing (forward contracting and futures) is either prevalent in small scale or has not been introduced Contingent scenario places respondents in a hypothetical market situation and most researchers agree that contingent valuation studies give an approximation of true behaviour

15. Modeling producers’ choice for forward pricing methods The study would examine producer marketing behaviour as producers’ choice of a preferred marketing alternative, which is based upon a set of producer characteristics (discrete choice model ) The choice parameter is 0 if the producer prefers cash sale, is 1 if the producer markets through forward contract and is 2 if the producer markets through futures. Explanatory variables: Socio-economic characteristics, risk attitude and perception towards risk, Institutional factors, Non- economic variables An Ordered Probit model will be used for estimation of the influence of the explanatory variables on choice of marketing option