The way government of India is planning to integrate Indian economy with the global economy, it is clear that every industry must plan for its future. There will be global players in India in every segment and new rules of the game will emerge.
Indian poultry sector is growing at around 8-10% annually over the last decade with broiler meat volumes growing at more than 10% while table egg at 5-6%, mainly driven by increased domestic consumption. The production capacity has responded with increased integration and large scale implementation of contract poultry farming.
Poultry farmers in India have moved from rearing country birds in the past to rearing hybrids which ensure faster growth of chicks, higher eggs per bird, increased hatchability, low mortality rates, excellent feed conversion and consequently sustainable profits to the poultry farmers. The poultry industry has been supported by indigenous advancements in genetic capabilities, veterinary health, poultry feed, poultry equipment, and poultry processing sectors. The productivity gains of poultry industry are reflected in relatively lower price increases in poultry meat over last five years compared to other meat products – Poultry WPI (wholesale price index) has grown at 12% y-o-y over 2008-2013 as against 21% for overall meat products basket providing an affordable alternative for meeting protein requirements in Indian diet.
Domestic poultry meat production (broiler – carcass weight) is estimated to have increased from less than
1.0 million tons in 2000 to
3.5 million tons now with per capita consumption increasing from 0.8 kg to 2.8 kg p.a during same period.
Table egg production is estimated to have increased from 30 billion eggs in 2000 to 66 billion eggs now, with per capita egg consumption increasing from 28 to 55 eggs during that period. The healthy growth in poultry output over last decade makes India one of the fastest growing major world market in the segment with future growth potential remaining strong on back of wide gap against global per capita consumption norms and favorable socio economic factors.
What is the future?
2012 onwards, poultry industry is going through rough time. Last two years were tough years for the industry on back of considerable increase in production costs with feed ingredients (Maize and Soymeal) touching record highs and realizations suffering on back of oversupply in industry.
For instance average production costs for a typical commercial broiler farm which was in the range of Rs. 45-50/kg in 2011 increased to more than Rs. 65-70/kg now.
To make things worse, broiler realizations stabilized and infact nosedived on back of oversupply and sporadic instances of ‘bird flu’ in certain geographies. There was a sizeable investment in capacity expansion especially in broiler segment and same resulted in oversupply. This significantly affected profitability of poultry farms and integrators with all the major poultry players recording losses in broiler business and shutting down of sizeable number of independent poultry farms.
The efforts of key integrators in poultry industry to control supply through measures like ‘hatching holidays’ initiated towards fag end of the year to improve realizations and industry is expected to register much better profitability compared to last years. The deliberate attempts to control supply will result in lower volumes (in terms of broiler chick placements) though industry is projected to register healthy growth in value terms in short term, but the critical situation still exists.
What is the way forward?
Industry may look united, but internally it is highly fragmented and lack of coordinated effort is hurting everyone.
The continued industry wide co-ordination will be critical to maintain sustainable margins in the business, considering increased production costs and seasonal volatility associated with the poultry products, though long term solution lies in developing processed chicken industry with value added offerings to protect against regional and seasonal variations in prices.
Large integrators as well as Government bodies are investing and promoting increased processing of poultry products (in form of frozen/chilled chicken and further processing in form of ready to cook/eat) given increased acceptability of processed chicken in domestic market though 92-93% of domestic purchases are still through wet market due to traditional preferences. Lack of hygiene, lack of value added products and lack of consistency in currently available products is not adding any confidence to the buying behavior.
Increasing penetration of QSRs (Quick Service Restaurants), continued increase in proportion of working women, changing lifestyles with preference towards convenience food and higher purchasing power are expected to provide strong growth push for processed poultry industry in long term.
The sustainable profitability can only be ensured by entering into global market based for chicken breast market and other value added products.
Learning from Brazilian poultry industry will be very useful to compete in the world market.
Bio-economy & Agribusiness Expert