Last two years have been very hard for the Indian Poultry industry. How so? Let’s start by explaining what are the constituents of this industry. First, raw material producers or farmers, mainly corn, soy and other commodities which are generally by-products of the human food industry. Second, raw material suppliers (traders). Suppliers also include medicine suppliers, vitamins, minerals and amino acids suppliers. Basically the vet pharma sector Third, poultry feed manufacturers. Fourth, poultry farmers, and hatcheries or incubators. Fifth, traders who distribute eggs and live birds. Sixth, retailers. This industry is mainly revolves around the traders.
The prices of raw materials in the past 2 years have gone up by around 50-80% example being corn which costed around Rs 14000-15000 per MT in the first half of 2018 and went up to Rs 25000 per MT by November 2019 and coming down to 21000 per MT in Jan 2020. Shortages were mainly due to poor weather and damage caused by pests. We will talk more about this below.
The rise in the cost of raw materials increased the input costs of the feed millers and in turn the farmers. Maize is added up to 65% to any type of poultry feed formula be it layer feed, broiler feed or breeder feed. Such an increase in the cost of raw material prompted an increase in the cost of the feed and hence cost of production for the farmers. But this rise in input costs does not necessarily mean rise in prices for their produce. We will see why later in this article. This rise in input costs also coincided with the fall in prices of the farm produce namely table eggs and broiler chicken prices. Egg prices kept falling from Rs 5/egg ex farm in March 2018 to Rs 3/egg ex farm in Jan 2019 to Rs 1.5/egg in Jan 2020 due the infamous fake news doing the rounds during the coronavirus pandemic and also other factors.
Broiler prices were pretty stable during this period until the fake news took over the world. Farmers had to sell their produce at throwaway prices i.e at 5% of the production cost. Some of them even had to cull their whole flock and cut losses. So the cost of production went up by 50% and the prices of the produce fell by 50%. Think about it. While all this was happening there were few people who did make money. They were the traders and the middlemen. Traders made money by trading the raw materials. They made money by trading the farmers’ produce and keeping their prices stable even though the farmers were bleeding. More details about the above scenario will be highlighted further below.
As explained earlier the prices of raw materials increased by 50-80% in the period between July 2019 to Dec 2020. Maize went up by 80%, Soy went up by 75%…………………………………………………………………….As the cost of production increased the farmers had to find different ways of feeding their flock. This resulted in feeding the flocks with non-maize-based feeds. Maize was replaced with rice, wheat, bajra, jowar and other carbohydrates. Feed prices were under control to some extent but the farmers were faced with another problem. The FCR, feed conversion ratio, a factor used by farmers to calculate the efficiency of the flock, went up. From FCR of 1.5 in pre-price rise period to an FCR of 1.8-1.9. A rise of 3-4 basis points. The impact was truly felt.Coming to layer farming, the cost of producing an egg in pre-price rise period was Rs 3/egg. As costs increased, the cost of production increased by 25-30%.Breeder farming……………………………………………………………………………..
Poultry industry has been growing at 8% year on year until last year. Its natural that such a growth rate attracted a lot of attention from potential poultry farmers. The profits were attractive and a very good secondary source of income for many. A lot of IT and other professionals started stepping into the farming shoes looking at this golden goose. Many small farms of 10000-30000 capacity layer farms and broiler farms came up all over the country.
This industry saw a surge in the output in the last two years or so. Well, naturally as the output goes up and the fact that India’s demand for eggs and chicken did not increase as much as the supply, the prices fell. This fact and the facts mentioned in the section above have hit the industry hard. Rumors are a short-term problem. Over production is the long-term problem farmers need to address. There needs to be regulation in place to check for the production or output of chicken and eggs. What needs to be done? Continue reading to find out!
Well as we can see the traders and the middlemen make most of the money out of the hardships of the farmers, be it raw material farmers (maize, soy etc) or poultry farmers. Something needs to be done so that the farmers are paid their dues. So what can the farmers do? First and foremost, work needs to be to educate consumers about the benefits and importance of consuming animal proteins. Over 70% of India’s population is protein deficient. That means they are consuming lesser than 1 gram of protein per kilogram body weight per person per day. This would not only lead to an increase in demand for eggs and chicken but also help in eradication of protein deficiency to some extent and also would result in healthier lifestyles.
What else can be done? If you come to think of it, the poultry farmers can not grow their own raw materials like maize, soy etc for making of the poultry feed as that seems unrealistic and very impractical. So what can be done? There is a more realistic and practical approach to this issue. Farmers now need to think of innovative ways of marketing their own produce to the consumer. This can be done by setting up their own brands or marketplaces, opening multiple channels of distribution to get the final product in the hands of the consumer. One way of doing this would be to go for retailing. All in all it will create a win-win situation for the farmers and the consumers alike.
But talking about doing all this is much easier than doing itself. The setting up of new brands and marketing the brands would not be a walk in the park. Farmers need to collaborate among themselves and work out a strategy on how to go about it.
Industry experts and branding experts need to work hand in hand with the farmers as they would need all the guidance they can get if they want to make this a successful model. One way of doing all this is to form a farmer producer company and pool in all the resources and work together to get each other out of this jam. There are a lot of benefits to forming a farmer producer company one of which would be that it would allow us to regulate the production, supply and demand of eggs and chicken which would in turn help in controlling the prices. This would result in stability of prices for a longer period of time thus ensuring steady income for the farmers and saving their livelihood.
