Supply/Demand Pushes up Chicken Prices in Nepal

NEPAL - Chicken prices are disproportionate to production cost, say an investigator. The reason appears to be strong demand and a fall in supply.
calendar icon 19 May 2009
clock icon 4 minute read

Chicken should not be as costly as it is now in the market, according to an article in Republica. Over the last year, the price of chicken has increased by 56 per cent, and this despite poultry's production cost only rising by around 30 per cent. On the face of it, such a disproportionate increase does not seem warranted, and cannot be determined, merely by weighing production costs against sale prices.

Last year, cut-up chicken cost 160 rupees (NPR) per kilo. This year, it costs NPR 250 per kilo. Last year, the cost of feed – the largest cost-contributor – was 30 per cent lower, at NPR 29 per kilo. And although over 50 per cent of the maize required for feed is imported from India and most of the other feeds (soybean cake, sesame cake and sunflower cake) are also imported, duty and taxes on these feeds have not risen very much.

Furthermore, Nepali poultry companies procure rice polish from markets in the country itself, and more than 75 per cent of the bone meal used in feeds is also domestically produced. The price increase cannot be attributed to higher transportation costs either: the transportation and labour cost in poultry production has not increased by more than 20 per cent over last year's levels.

If labour costs had risen significantly, the difference would have shown up, for example, in the cost incurred in cutting up the chicken and preparing it for consumption. But live chicken last year cost NPR 110 per kilo, while this year, it costs NPR 175 per kilo, which means the increase is independent of labour costs.

So what accounts for the sharp rise in price? It's all about that age-old theory of supply and demand, says Republica.

"The price of chicken has skyrocketed because there has been a sharp fall in the volume of chicken produced by the poultry farms in the country," says Tika Ram Pokhrel, president of the Nepal Poultry Entrepreneurs Forum (NPEF), an umbrella organisation of poultry producers. And that decrease was the result of the avian flu rearing its ugly head in Jhapa in January 2009.

When that instance of bird flu became news around Nepal, says Mr Pokhrel, who is also a leading hatchery entrepreneur, the production of chicks went down to 600,000 heads per week – from the usual number of 900,000 birds per week. In other words, with the public reluctant to eat chicken, poultry farmers also refrained from rearing the birds.

But Nepali chicken lovers apparently abhor a vacuum in their chicken-eating lifestyle. In fact, after the initial scare created by the avian flu, Nepalis actually increased their consumption of chicken: consumption shot up by 15 to 20 per cent over the previous year, and that further widened the demand- and-supply gap.

"The supply of live broiler chicken, for example, has nose-dived to 160,000 kg per day, against the demand of around 205,000 kg per day," said Mr Pokhrel.

And as the nation got back to consuming chicken in the usual copious quantities, that resumption, coupled with chicken sellers raising their prices in a market where mutton and beef prices had significantly increased, led to the high prices of chicken that we see today. If the poultry farmers were to shed their fear of the market´s not responding, then chicken prices might at least get back on the path to stable prices.

But, says the NPEF, poultry farmers have yet to rear chicken in the numbers they used to. The estimated 2,000 commercial poultry across the country produced only around 4.2 million chickens over the last year, compared to the usual six million of normal seasons. And until the poultry owners get back to producing the number of chickens they used to, the price of Nepal´s favorite meat will continue to increase, concludes the Republica article.

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