Evaluation of Financial Efficiency of Poultry Farms in Tabriz County

Broiler poultry units are among the most important units in the agricultural sector. In most developing countries, there are a lot of investments in these units. By examining the state of industry in the last few years, which has been declining, it seems that there is no efficient and optimal utilization of these units. Due to lack of proper management, appropriate financial programs and financial operations control in chicken production and main inputs price fluctuation, poultry farms do not have the necessary financial efficiency. These issues have reduced the financial efficiency of production units in the poultry industry. Consequently, the competitiveness of products of these units has decreased compared to their own competitors. In this regard, the review of financial efficiency can provide a general picture of the financial situation and performance of these units and can instruct managers and financial planners in making appropriate decisions. Accordingly, present study tries to review the financial efficiency of poultry farms in Tabriz County which has a special place in supplying protein of country and East Azerbaijan province, Iran. In this study, financial ratios and data envelopment analysis (DEA) approaches were used to evaluate financial efficiency. DEA is a nonparametric method in operations research and economics for the estimation of production frontiers. It has been used to empirically measure productive efficiency of decision making units (or DMUs). Although DEA has a strong link to production theory in economics, the tool is also used for benchmarking in operations management, where a set of measures is selected to benchmark the performance of manufacturing and service operations. In the circumstance of benchmarking, the efficient DMUs, as defined by DEA, may not necessarily form a “production frontier”, but rather lead to a “best-practice frontier. Non-parametric approaches have the benefit of not assuming a particular functional form/shape for the frontier, however they do not provide a general link (equation) relating output and input. There are also parametric approaches which are used for the estimation of production frontiers. These require that the shape of the frontier be guessed beforehand by specifying a particular function relating output to input. One can also combine the relative strengths from each of these approaches in a hybrid method where the frontier units are first identified by DEA and then a smooth surface is fitted to these. This allows a best-practice relationship between multiple outputs and multiple inputs to be estimated. Data envelopment analysis (DEA) is a linear programming methodology to measure the efficiency of multiple decision-making units (DMUs) when the production process presents a structure of multiple inputs and outputs. The statistical population of this research was 45 poultry farms in Tabriz County which were surveyed by census. By studying the economic characteristics of poultry farms in Tabriz it is revealed that the minimum and maximum capacity of studied poultry units is 6000 and 100,000 pieces, respectively; with an average capacity of 30,000 pieces. According to the results, mean production of units is 66 tons at each period and about 56 percent of units are producing below the average production. Results indicate that the average of financial efficiency of poultry farms is 63.66 percent. Also, among 45 studied units, only 5 of them have 100 percent efficiency and rest of them suffer from lack of this important factor. Therefore, there is a gap of about 36 percent to maximize financial efficiency (100 percent). Results reveal that the units which their efficiency are more that 70 percent, have higher production capacity than the other ones. Economic and logical use of inputs, especially nutrient inputs and energy will have a significant impact on reducing the costs of the poultry farms and increasing their profit. Furthermore, the existence of inflationary situation in economy and the volatility of prices, including the price of inputs for poultry units, have led to a significant increase in production costs in poultry farms; as a result stabilizing the price of the main inputs can prepare a suitable base for regular planning and enhance financial efficiency of units. One of the problems with this type of studies is the lack of financial information of economic units. Given that the results of this type of studies can be applied to better planning of their economic units, therefore establishing and maintaining financial information by economic units will help to better and accurately conduct these kind of studies.