Poultry business becomes viable on rebound in prices

Chicken, egg prices rise 25-30 per cent in past two months; experts say upward move will continue

After incurring losses for nearly nine months, the poultry sector has become viable thanks to a sharp turnaround in product prices. Chicken and egg prices have increased 25-30 per cent over the past two moths, mainly because of supply crunch.

Prices of poultry products had steadily slumped to below the cost of production in July 2015 on oversupply. Since then, the downward trend continued to hit the lowest in February 2016, when the benchmark broiler and eggs were quoted at Rs 55-60 a kg and Rs 2.60-2.75 a piece, respectively. The average cost of production of broiler chicken and eggs works out to Rs 85 a kg and Rs 3.50 a piece, respectively.

Following the sharp decline in realisation, poultry farmers scaled down production by 10-15 per cent accumulatively to cut losses. Apart from lower availability, the prickly heat, too, resulted in high mortality rates of birds.

“Prices remained unviable since July last year, triggering a cut in production by farmers. Also, from the level of 2-3 per cent of average mortality rate in winter, it has risen to 8-9 per cent as birds cannot tolerate above 40 degree Celsius. These two factors supported a rebound in the prices products,” said Balram Yadav, managing director of Godrej Agrovet Ltd.

Broiler chicken prices have jumped to trade at Rs 80-90 a kg in wholesale and Rs 110-120 a kg in retail markets. Eggs have also moved up similarly to quote Rs 30-36 a dozen in wholesale and Rs 45-50 a dozen in retail markets, both up 25-30 per cent over the past two months.

Ramesh Khatri, president, Poultry Federation of India, said there could be another 25-30 per cent increase in poultry products’ prices given the sustained rise in demand and moderating availability. “Birds are weather-sensitive. The scorching heat over the past few weeks has increased mortality rate in birds to 25-30 per cent of the normal breed from a normal five per cent.”

While same scenario prevails across the country, poultry farmers in south Indian states were affected more than farms in other states due to the lack of protection mechanism. Water supply for poultry farms remained one of the major constraints in states such as Andhra Pradesh and Telangana, where the major pockets of poultry farms exist. Several of them have shut shop as they incurred losses in the past three quarters.

A recent study by rating agency Icra said the growth in the poultry sector moderated in 2015 with base effect catching up and planned supply control measures adopted by the sector to control the supply glut in the broiler market.

A K Sharma, coordinator of the Federation, said, “The supply of poultry products has, therefore, reduced while their demand continues to rise. So, prices of poultry products have gone up. Prices of both chicken and eggs would continue to move upwards till the monsoon sets in.”

Normally, live and new breed of birds get respite from the heat with the first showers of the monsoon. The earlier the showers, the better for the fowls, he added.

Icra estimates domestic broiler meat demand to continue to grow at 5-7 per cent and table egg demand to grow at 4-5 per cent in the long term.

Rising feed prices have also contributed to the spurt in the prices of poultry products. Prices of bird feed including maize and soya meal have jumped 10-15 per cent in the past two-three weeks.