Rising input costs and falling consumption hurt poultry sector

In recent months, rising input costs and low consumption have hit the poultry sector. The segment, which saw peak selling prices of up to Rs 80 a kg between April and June this year, as the industry resorted to production holidays, is again recording losses due to a decline in prices in the last quarter.

In southern markets such as those in Bangalore, Chennai and Hyderabad, farm-gate prices of poultry have fallen to Rs 55 a kg, a decline of 34 per cent compared with Rs 80-83 a kg in June this year. In northern markets such as Delhi, Lucknow and Chandigarh, prices have declined to Rs 62 a kg, against Rs 93 a kg in June.

Poultry farmers are losing Rs 8-10 a kg, as production costs stand at Rs 63-65 a kg. The rise in input costs is more in north India, as maize, a key ingredient in poultry feed, is largely procured from southern states. “The prices of key poultry feed such as maize, soya extracts, bajra and imported amino acids and vitamins have increased 25-30 per cent. In addition, consumption has dropped, as people do not consume during the months from Shravana to Karthik (July to November),” said M C R Shetty, president, Karnataka Poultry Farmers & Breeders Association (KPFBA).

POULTRY SNAPSHOT

• Since June, farm-gate prices of poultry fell 34% to Rs 55 a kg in southern markets
• In Delhi, Lucknow and Chandigarh, prices fell to Rs 62 a kg from Rs 93 a kg in June
• Poultry farmers are losing Rs 8-10 a kg, as production costs stand at Rs 63-65 a kg
• In 2012, the poultry sector grew 17.2% to 3.4 mt in volumes, compared with 2.9 mt in 2011
• Icra says per capita annual consumption rose from 0.8 kg to 2.8 kg in the last decade

Last year, operational costs rose significantly, following a 25 per cent rise in maize prices. At that time, soy meal prices had more than doubled — from Rs 22 a kg in June 2012 to Rs 45 a kg in August 2012.

“Hatchers import a variety of amino acids and vitamins used as feed additives; due to the rupee’s depreciation, the prices of these products has risen 50 per cent to Rs 250-270 a kg from Rs 150-170 a kg a year ago,” said G Gopal Reddy, executive secretary, KPFBA.

As a result of controlled meat production and 'hatching holidays’ initiated by key integrators last year, poultry prices appreciated 65 per cent (these doubled in a few regions) during the first four months of this year.

“Last year, poultry prices were very low. We have seen input costs going up significantly—by at least 50 per cent. As there was a drought in Karnataka, the productivity of maize was very low and, as a result, prices of the crop increased alarmingly. Other factors such as the rupee's depreciation hit us very hard, as we have to import amino acids and some vaccines, and this became costly,” Shetty said.

In 2012, the poultry sector grew 17.2 per cent to 3.4 million tonnes (mt), compared with 2.9 mt in 2011. Domestic production (broiler-carcass weight) was about one mt in 2000. In a report earlier this year, Icra said per capita annual consumption increased from 0.8 kg to 2.8 kg during the last decade.

Through the last decade, the Indian poultry sector has been growing eight-10 per cent annually, with broiler meat volumes growing about 10 per cent.

In 2012, poultry prices had crashed to about Rs 40 a kg.

The second half of 2012 was a difficult period for the segment, owing to an increase in production costs, with feed ingredients touching record highs and realisations suffering due to oversupply. However, the efforts of key integrators in the sector—measures such as ‘hatching holidays’—initiated towards the end of 2012, resulted in improved realisations in the first half of this year. “We expect a similar situation only from mid-December, when consumption picks up,” Shetty said.