Indian Poultry Sector May Hatch Better Profits in Second Quarter03 July 2014
INDIA - The Rs58,000-crore Indian poultry industry is expected to report higher margins despite realisations being volatile and wide disparity in supply-demand. High feed costs will also remain a concern.
“The outlook for the Indian poultry industry appears better for the second quarter as supplies are affected by the hot weather. The market is expected to remain volatile,” Rabobank said in its quarterly report.
Quoting Rabobank, The Hindu Business Line reports that the industry was battered by higher input costs and oversupply in the first quarter. Strong performances in 2010 and 2011 had resulted in sizeable investments in capacity expansion, especially in the broiler segment, leading to oversupply.
Efforts of key integrators in the poultry industry to control supply through hatching holidays, initiated at the fag end of 2012, resulted in improved realisations in the final quarter of 2012-13 fiscal, although these were not for a longer period.
One of the biggest challenges facing the industry is the rising cost of soybean meal. Its price increased 40 per cent from $548 per tonne in January to $780 per tonne in May.
“This was an unwelcome cost as we were already reeling under surplus output and weak prices due to economic downturn,” said R. Lakshmanan, Chairman, Broiler Coordination Committee.
Feed costs account for 70 per cent of the total production cost. Though the industry has been experimenting with alternative feed ingredients such as bajra, jowar and rice bran, the scope for substitution remains limited. It is even feared to affect productivity.
The substitutes aren’t cheaper either. “The production cost comes to Rs67-68 a kg while we are able to sell at Rs64-65. We are unable to pass on the costs to the customers as we find resistance from buyers,” he said.
“But the second quarter will be marginally better since there will be a good demand for animal protein in summer,” Mr Lakshmanan said.
The global outlook for the industry, however, remains bullish driven by relative price support from high beef and pork prices.
Demand recovery and a more balanced supply and demand situation in most regions of the world will also support the trend. This will lead to an improvement in profitability for the global poultry industry.
“Under improved global market conditions, led by the North American region, a slight increase in global chicken prices is expected,” said Rabobank analyst, Nan-Dirk Mulder.
Global feed prices are expected to decline in the third and fourth quarter based on current fundamentals and a good crop outlook for wheat and soybeans.
In India, however, “delay in monsoon has changed sentiments, and further progress of monsoon continues to be a very crucial factor. With the central India already lagging behind, the undertone remains bullish. The coming months could be volatile with the price direction depending on monsoon and sowing progress,” said Vinita Advani, Research Analyst at Geojit Comtrade Ltd.
Despite this positive outlook, the possible return of volatility in feed prices remains a threat to the poultry industry in the wake of ongoing concerns about the situation in Ukraine and the potential threat of an El Nino event.ThePoultrySite News Desk