Future growth potential and economics of poultry feed industry in india

Abhijeet Banerjee, Religare Commodities

The poultry industry has been expanding at a rapid pace in Andhra Pradesh, Karnataka and Tamil Nadu, and hence there lies ample opportunity for individual feed players to grow. Increasing demand for poultry products from these states has been the contributing factor for the growth of poultry sector in these states in recent years. Current demand for poultry feed in India is estimated between 21 and 23 million tonnes. Poultry feed accounts for nearly 60 per cent of the total feed market in India. The consumption of poultry feed also increased to 8 per cent during 2012-13, as compared to 7 per cent during 2007-08. The Indian poultry feed market has the potential to grow by 7 to 8% in next few years.

Domestic broiler industry has been considered the strongest driver behind the development of feed industry in India, and has benefited significantly from the presence of integrators (which is 70 per cent of total industry), in addition to a shorter production cycle. As a result, the Indian poultry industry could achieve feed based efficiencies and rationalization. Roughly 90 per cent of the broiler industry uses compound feed and India is the fourth largest broiler producer and third largest egg producer. Having said that, compound feed in the egg layer industry remains highly underutilized and usage varies from 5 per cent to 25 per cent. Total feed demand is estimated at approximately 11.5-11.8 million tonnes, based in the current egg production. In future the egg laying industry offers a promising potential for the growth of the feed industry.
The total feed demand is currently expected to be around five to six per cent in context to the egg industry. Studies have revealed that significant opportunities exist in the egg industry for compound feed demand in the near term. However from a broader perspective, egg layer farming will be integrated backward into feed millings amid farms consolidating and growing in size. Poultry feed in India comprises grains like maize, wheat, sorghum, Bajra, Ragi and broken rice, grain by-products like rice polish, de-oiled rice bran and maize gluten meal; oilseed meals from soybeans, mustard, groundnut and sunflower; animal protein sources like fish meal, whole fish, meat and bone meal, poultry-by-product meal; vitamins, minerals and various feed additives.
Increasing household incomes have been responsible for a steady growth of poultry consumption in the country. As a result animal-based protein intake has also improved. Broiler meat has an advantage of being a healthier choice versus red meat like mutton, pork and beef, as it comes under the white meat category. It is cheaper than seafood as well. Estimates show that India’s per capita consumption of broiler meat grew by a 7.4 per cent compound annual growth rate (CAGR) from 2009-10 to 2013-14, while egg consumption rose by 3.7 per cent CAGR. The per capita consumption of broiler meat is estimated to grow by a slower 6 per cent CAGR from 2013-14 to 2017-18, while egg consumption might improve slightly to 3.9 per cent CAGR, going by the research data.
Statistical studies convey that Tamil Nadu has the largest poultry feed requirement of 1.38 million tonnes from broiler and 1.97 million tonnes from layer sector. Second is Andhra Pradesh, which has an annual requirement of 1.27 million tonnes for broiler and 3.09 million tonnes for layers. Similarly, Maharashtra annually requires 1.23 million tonnes for broiler and 360,000 tonnes of feed for layers. West Bengal state requires 1.12 million tonnes of feed for broilers and 120,000 tonnes of feed for layers, while Haryana & Punjab state require 880,000 tonnes of broiler feed and 1.49 million tonnes of feed for layers. Entry of more organized players, higher integration in the poultry feed industry in addition to stable feed prices will be seen as drivers for growth of poultry feed industry in near future.
Takeaway from few research studies conducted on poultry farming/feed industry in last 3-4 decades
The sums of money that have to be paid for the efforts and sacrifices for producing a commodity are expenses of production and this is called cost of production – Alfred Marshall (1970)
Fixed costs include the cost of chicks, depreciation and interest on fixed capital and rent – Singh and Patel (1974)
Egg production cost consisted of the cost of pullets up to the laying point, feed, labor, electricity charges, depreciation, interest on capital etc – Ports Mouth (1975)
Land requirement for poultry farming is low, the amount of capital investment need not be high, the gestation period for capital is short and poultry can utilize by-products of food grains which are unfit for human consumption. Cost establishment charges, supervisory charges, labor charges, expenditure on feeds, medicine, miscellaneous expenses, depreciation on poultry bird building, poultry house, implement and furniture, and interest on working and fixed capital were also included – Kumat (1975), who attempted analyzing the cost structure of egg production.
Fixed costs include the cost of day old chicks, interest and depreciation of fixed capital, capital like land, building and equipment and variable costs include expenses on feed, human labour, medicine, miscellaneous expenses and interests on working capital – TalukderTalukder, J.K, C.V. Reddy and Tej Abrader (1983)
Poultry had become a vital component of the farm economy as it generates additional income and employment in the rural area. The cost estimates revealthat feed alone accounts for about two thirds of the total cost – Pandy R.K., Bhardwaj, S.P. Mahajan, V.K. and Nirman K.P.S. (1996).
Chicken start laying eggs when they are about 6 to 8 months of age and broilers get ready to be marketed for poultry meat at the age between 6 to 10 weeks. As the interval between the poultry generations is very short, it is possible to bring about a phenomenal increase in poultry production in short interval. For example starting with a set of pullet and a cockerel, it is possible to produce 2,500 commercial pullets within 40 months which in turn can lay half a million eggs within 18 months. Poultry is not a seasonal industry but gives a good income throughout the year with minimum labor and expenditure. Moreover, the farmer also starts getting returns very early, as layers start laying at their, age of 6-8 months, the farmers can take good care of poultry and earn a substantial income from eggs, meat, feathers and manure – Chandy (2005)
Egg production costs declined to their lower level when the size of the laying stocks exceeded 5000 birds and there were economics of size over the different ranges of output. If the aim is purely egg production, only such breeds should be maintained as processing all the qualities of good egg layers i.e. quick maturity and capacity to produce a large number of standard size eggs – Ames and Ngemba (1986)
Around 1,382 small and large poultry co-operative societies have been set up in the country for marketing of eggs. But due to their limited operational areas and lack of support either in inter-state or in export trade, and lack of resources to undertake a total programme of procurement, package, storage, transportation and retailing of eggs, these co-operative societies have achieved limited success. The total turnover of these societies was Rs.45.3 million only in 1976-77 as compared to an estimated national egg production of Rs.4,000 million. In the present study the cost of feed, medicine, labour lighting, water and miscellaneous expenses are included in variable costs. The total cost of production varies from farm to farm and also it is influenced by climatic and soil conditions – Panda and S.C. Mohapatra (1998)
Researchers have often reviewed the area of rural development and poultry farming, poultry infrastructure, cost of production, production and profit, marketing and its problems. There are evidences from research studies that show poultry farming contributing for rural development. The studies have insisted on infrastructure requirements and marketing problems in the poultry farming. It becomes necessary for the government to consider significance and economic feasibility in expanding poultry farming in the country.
In order to encourage poultry business contribution towards national income, and provide employment to the rural masses, the government needs to solve the problems associated with the poultry farming, in coming years. There are concerns of rising costs of raw materials for producing poultry feed so the Government has to check the pressure to reduce feed costs. One solution can be enhancing the usage of enzymes, as it helps in improving nutrient absorption and ingredient digestibility. This in turn, will be beneficial in allowing higher flexibility in feedstuff utilization, reduce feed costs and can keep a check on the quality as well.

Tables & chart are available on request