Due to high input prices, the margins of India’s chicken business are predicted to decrease considerably in the fiscal year 2022.
Prices for soybeans and maize, two main commodities used as animal feed in the poultry business, are skyrocketing as a result of the crisis between Russia and Ukraine.
First, there was Covid, when chicken product prices decreased due to erroneous worries that their consumption was linked to virus transmission. Then came the statewide shutdown, followed by the avian influenza epidemic in January-February 2021, which impacted sales just as they were rebounding. Just as it happened, the second Covid wave hit. And now, just as the sector was regaining its footing, feeder costs have skyrocketed as a result of the Russia-Ukraine conflict.
Soybean has been the primary driver of increased feed costs. Feed contributes for 70% of variable expenses, while maize accounts for 60-63 percent of feed volume, while soymeal accounts for 25-27 percent. Maize prices declined by 30% in FY2021, while soybean prices grew by 6% year on year.
De-oiled cake is imported by India for usage in poultry feed. However, due to the conflict with Russia, imports from Ukraine have ceased, causing price increases. Toss in the price of maize, and you’ve got a recipe for a disaster. Despite the fact that India produces a lot of grain, the price has skyrocketed. Because Ukraine is now unable to sell grain to the rest of the globe, other nations have resorted to India to fill the void. Corn feed, another material used to feed hens, has grown in price as demand for Indian corn has soared. Maize farm gate prices have risen from Rs. 19.50 per kg to Rs. 22 per kg, thanks to increased exports of Indian corn.
“The sector is very vulnerable to changes in input prices, particularly feed, which accounts for 70% of variable expenses. On average, we predict industry margins to suffer in FY2022, owing to a surge in soybean and maize prices. While several participants experienced net losses in the first half of FY2022, the subsequent lowering of soybean prices as a result of government interventions and fresh crop supplies brought some relief. Recent geopolitical concerns, on the other hand, have re-heated soybean prices,” according to Icra, a rating agency.
ICRA anticipates industry operating margins to decline by 350 to 450 basis points in FY2022, as higher-than-normal feed costs would have a significant impact on profitability.
Chicken prices have also increased by 25% since January, with industry analysts predicting a further increase of 10% to 50% in March in various sections of the nation owing to a severe feed scarcity.
Aside from chicken, consumers should expect an extraordinary increase in the price of animal protein, which includes dairy goods and fish. Amul, the world’s largest dairy company, hiked retail milk prices by 4% in all Indian markets on March 1st. “Rising energy, packaging, transportation, and cow feeding expenses have all contributed to this price increase. As a result, the overall cost of operation and milk output has increased,” Amul stated in a statement.
Mother Dairy has also announced a price increase of Rs. 2 effective March 6th.