Poultry firms see promising future ahead over subdued feed prices

Subdued feed prices to keep margins elevated in next few quarters, despite stable chicken and egg prices

After nearly four years of downturn, the outlook seems promising for India's poultry companies, on expectations of supply deficit and rising consumer demand for chicken and eggs.

Profit margins of poultry firms (primarily producers of fresh chicken meat and eggs) were under pressure for four years due to a sharp increase in feed prices. Worried at a consumer shift to alternative sources of protein intake, they did not pass on the feed price hike. Even during supply deficit days, poultry firms raised their product prices only marginally.

Now, lower feed prices have offered a cushion to their margins. While egg prices have gone up marginally over recent months to trade currently at Rs 4 each, broiler chicken prices remain fairly stable at Rs 78 a kg.

"Still, we are seeking nearly 15 per cent of profit margin at the current rate of chicken and eggs due to low feed prices. We see feed prices subdued till June. By then, the next season monsoon forecast would give us a clear indication of kharif crop sowing and feed price movement for the later part of calendar 2018. We see, therefore, poultry firms yielding good profit margins till the June quarter," said Balram Yadav, managing director, Godrej Agrovet.

Average soybean meal prices jumped to a high of $405.30 a tonne in June 2016 on the benchmark Chicago Mercantile Exchange, on lower soybean output globally. It has since declined to trade currently at $316.5 a tonne, on increased supply of soybean and thereby meal from the US, India and other major producing countries. Similarly, prices of other feeds have also declined. In India, soybean prices have recovered to trade currently at Rs 3,300 a quintal in spot Indore markets, after falling below Rs 2,800 a quintal late last year. And, maize prices have fallen over 20 per cent in the past six months.

"Both chicken and eggs prices have not seen a big appreciation over the past few months. In fact, these are lower today than last year. Still, poultry farmers are earning profits due to lower feed prices. We see this trend continuing in the next couple of quarters," said K G Anand, general manager, Venkateshwara Hatcheries, one of the largest producers of poultry products, under the 'Venky's' brand.

A recent Rabobank study estimates a promising outlook for India's poultry firms, with a sharp increase in profit margins. It estimates India's demand for poultry products to rise by five per cent yearly, with prices to remain healthy. The share price of Venky's India is 10 per cent off its 52-week high of Rs 3,046 apiece. Godrej Agrovet is trading at Rs 618.85; the all-time high was Rs 635 apiece on Wednesday.