Broiler Farming Risk Assessment: Market Risk Premium Measures and Marketing Strategies

The broiler farming business faces challenges due to many reasons such as technical innovation, finance uncertain parameters and dynamic marketing complex. Broiler farms at Sultanate of Oman has been performing with challenge and many constrains, including poor farming practices, climate stress and variability, feed grain price increase. The risk assessment of broiler business indicated high impact of products unit cost of productions, market dynamic risk and financial sustainability. Market competition and cheap frozen chicken products imported from outside significantly affect the local broiler market risk and uncertainty and marketing strategies. The study applied stochastic budget Monte Carlo Simulation approach to calculate market risk primum and reform market strategies and align them with acceptable risk tolerance comfort level of the stakeholders’ perceptions. Three production levels, products mix models, were tested under two different scenarios to measure market risk and market strategies.The study performed stochastic efficiency with respect to a function (SERF) to calculate certain equivalent (CE) figure to rank alternative market’s scenarios under uncertain situations. The overall results showed that unit cost, followed by broiler market risk and sale revenue volatilities, are highly affecting profit in integrated complex system. Quadrant analysis was performed to understand broiler market dynamics impact to chicken products market shares and market growth and accordingly develop comprehensive market strategies business objectives. Fresh whole chicken products recognized as high market shares and slow market growth and identified as a leader in the marketplace that generates consistent revenue. Frozen products are recognized as low market shares and slow market growth that cannot generate sufficient cash to sustain healthy financial. The study pointed out that frozen products have potential and need heavy investment to balance between steady market share and business growth to achieve financial stability and business sustainability. Frozen products serve only 15.7% of the total Company market share and might be repositioned to serve niche markets. Both operation and market risk measures and quantification enabled organization for effective fresh products repositioning strategy to algin with current market trends. The significant sale discount of 17% and lowering frozen price increased sale revenue but cannot be recognized as comprehensive strategies for market share increase due customers perceive the product as less valuable and below market standard weight. Risk premium of RO 48,256 is a risk due to unsystematic market volatility challenges and inefficient operation practices produced unsalable small whole chicken size at 6,557 tons production level. In conclusion, the risk premium of RO 0.209 per one kg of chicken meat is compensation between current broiler farming practices return and higher uncertain future return and represent cost of offsetting broiler business difficulty by developing broiler business in other informed decisions and directions.