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Indian Poultry Industry Predicted to Record Improved Profit Margins

29 May 2015

INDIA - India’s poultry sector will record an improvement in revenue during the current fiscal year, Mumbai based research and ratings agency ICRA said in its report released recently.

The average revenue growth for key poultry integrators for fiscal year 2014-15 is expected to be 15 per cent supported mainly by increases in realisations and continued expansion in integration activities.

However, the rating agency said that the full year operating margins are however expected to remain under pressure even after a strong Q4 of fiscal year 2014-15, given poor realisations in Q3 of fiscal year 2014-15 and continued high feed costs.

The report also said that broiler meat volumes are expected to register muted growth in the current fiscal year, on the back of supply control measures adopted by the industry to support sales, although value growth continues to remain healthy.

India’s total poultry market size is estimated at $9.05 billion (Rs 58,000 crore) at the wholesale price level, indicating value growth of 8 per cent since calendar year 2012.

The industry is taking corrective measures to adapt to a challenging operating environment – created by sharply fluctuating realisations and high production costs - which should result in overall improved profitability for the industry going forward.

However, external factors like an unfavourable monsoon (affecting feed ingredient prices), global corn and soymeal supply variations, and the threat of bird flu would remain key sensitivity factors.

These external factors are combined with inherent industry sensitivity characteristics of regional supply and demand imbalances and high dependence on wet/live market.

The report also said that strong performances in 2010 and 2011 had resulted in sizeable investments in capacity expansion, especially in the broiler segment leading to an oversupply situation.

Although volume growth for broiler meat was kept flat in calendar year 2013 to support broiler realisation, it is expected to bounce back in calendar year 2014. To avoid sudden supply gluts and maintain profitable operations, it is more sustainable for the industry to control broiler meat volume growth at 5–7 per cent.

Despite temporary supply mismatches resulting in demand substitution to other meat options, demand growth continues to remains healthy at 7-8 per cent due to favourable socio economic factors such as changing eating habits, higher purchasing power, and urbanisation.

Consumers are also showing increasing health consciousness, moving them towards a protein rich diet, and they prefer chicken meat due to religious preferences.

Production capacity has responded with increased integration and large scale implementation of contract poultry farming.

Farmers in India have moved on from rearing country birds in the past to rearing hybrid varieties that ensure faster growth of chicks, higher eggs per bird, increased hatchability, low mortality rates, improved feed conversion ratio, and consequently more stable profits.

The Indian poultry sector has been growing at around 8-10 per cent annually over the last decade, with broiler meat volumes growing at more than 10 per cent, whilst table egg volumes have grown at 5-6 per cent, driven by increased domestic consumption, the report said.

Jagdish Kumar, Editor

Jagdish Kumar, Editor

Top image via Shutterstock

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