Poultry products cost more on high feed prices

Broiler prices up 6%, eggs 17% in July; industry says even these unviable, as input costs set to rise

Chicken and egg prices have both moved up despite this being a lean demand season, due to steep rise in feed prices.

Broiler prices are up six per cent since July 1 and eggs by 17 per cent. An egg now costs Rs 3.50 and a kg of broiler chicken is sold at Rs 70, against Rs 3 and Rs 66 a kg, respectively, as of end-June.

Usually, the price of poultry products increases either during the peak summer or winter, depending on the  movement in feed prices.“The industry could not wait for the winter season to set in to raise chicken and egg prices, due to an exponential spurt in feed prices. Both maize and soya prices have risen sharply in the past few months, a part of which was needed to be passed on to consumers for survival of the industry,” said K J Anand, general manager of Venkateshwara Hatcheries, which sells poultry products under the Venky’s brand name in India and abroad.

In recent months, maize prices have risen to Rs 15 a kg from Rs 12 a kg and soya to Rs 50 a kg from 35 a kg. A a report from Rabobank International says rising feed prices are the poulty industry’s biggest challenge. “Soymeal price increased 40 per cent from $548 a tonne in January to $780 a tonne in May. This was an unwelcome cost increase for the industry, already operating with surplus production and weak prices due to the weak domestic poultry market, in which consumers are reducing chicken purchases to save costs in the current economic downturn. Under these circumstances, the industry does not have the power to pass on the higher costs to customers, resulting in losses,” said Pawan Kumar, an analyst with Rabobank.

India’s poultry industry had experienced one of the worst first quarters (January–March) in the past five years. Average profitability in the quarter declined 70 per cent over a year earlier and from a five-year average. After a surge to Rs 80 a kg of broiler and Rs 4 an egg during  peak summer, prices fell to Rs 66 a kg and Rs 3 an egg towards June-end.

During the rainy season, demand for poultry products is lower due to the festival period, starting with Ramzan and followed by Dussehra and Diwali. Demand is also uncertain due to subdued economic conditions.

Business chamber Assocham estimates the Indian poultry market at about Rs 49,000 crore currently and growing at 10-12 per cent annually; it is estimated to hit Rs 2,017 crore by 2017.

“Egg and chicken prices below Rs 4 apiece and Rs 80 a kg are unviable for farmers. A number of unorganised sector players have shut due to viability issues. Many more will follow if the price does not recover,” said Anand.

Less monsoon rain and increased demand for soymeal in the international markets is expected to lead to an increase in average prices of poultry feed by 25-30 per cent.

Feed is a key input in poultry farming and this rise suggests prices of eggs and chicken might rise 15-20 per cent. The rise in feed prices is also likely to put pressure on poultry producers’ margins.