Data Highlights the Need to Adapt Production to Demand Fluctuations

In our recent discussions, prominent figures in the poultry business highlighted inconsistent demand as a significant factor contributing to their losses. Think Grain Think Feed recently had a conversation with KS Ashok Kumar, the founder of Maa Integrators, who managed to unravel one of the biggest mysteries in the Indian Poultry Business by analyzing broiler demand patterns and creating an annual calendar. Here are some key excerpts.

Can you please provide your insights on the correlation between demand and supply during different seasons in India?
Despite India being a tropical country, we witness variations in temperature and weather, ranging from extreme summers to extreme winters, which impact poultry production. In moderate to cool temperatures, birds gain 2kg in 30-32 days, whereas in higher temperatures, achieving the same weight takes up to 42 days. Furthermore, demand for poultry is higher in the summer and lower in the winter due to religious festivals when many people refrain from consuming meat or eggs. This leads to surplus production and subsequently lower prices.
Our data spanning 12 years highlights the necessity to adjust production based on demand fluctuations.

Demand-based production could help sustain the poultry business with better profitability. What are the constraints then?
The lack of coordination poses challenges. When one player reduces production due to lower demand predictions, another player may increase production, causing a mismatch and overproduction. Consequently, there’s a 95% chance of selling at a price below the cost of production.

Presently, the market is highly volatile. Producers struggle to cover their production costs, while consumers continue paying the same prices. In a free market, individuals invest in the poultry market hoping for profits, but when volatility prevents this, many players exit the business, creating a void that escalates prices. The only solution is to take collective action to address the issue. If supply slightly trails or matches demand, better prices can be attained.

During 2012-2018, all major players in the country synchronized their holidays and achieved planned production, resulting in profits for everyone. However, this is no longer the case.

Integrators operate across multiple states. Is there a specific state demonstrating a more disciplined approach to demand-based production?
Yes, better coordination was observed among various states, including West Bengal, Chhattisgarh, Andhra Pradesh, Maharashtra, Gujarat, Karnataka, and Tamil Nadu, now Telangana. These states embraced demand-based production and reaped profits. Although uniting competitors is challenging, it has been accomplished in the past.

The poultry business operates on the concept of FCR (Feed Conversion Ratio), but concerns arise regarding the quality, availability, and pricing of feed ingredients. What is your perspective on this?
The CAGR in agricultural production is the lowest compared to other business activities. There’s a notable disparity between the growth of the Indian poultry business and the productivity growth of feed ingredients. Urgent technological advancements are required to enhance production; otherwise, by 2040, a deficit may arise, necessitating import dependency.

Similar concerns exist for energy sources; energy requirements are escalating rapidly across all business activities. Poultry is no exception; if maize becomes unavailable, alternative substitutes will be sought.

The primary criteria for the poultry business typically revolve around the least-cost feed and FCR. The industry has witnessed an improvement from an FCR of 2 to 1.65, with the next target being an FCR of 1.4-1.5. This progress is attributed to advancements in breeding genetic engineering. The current focus should shift toward achieving the lowest cost of meat production, optimizing efficiency per kg of meat.

What behavioural changes have been observed in the Indian poultry industry? How can digitalisation contribute to supply-demand-based production?
The poultry industry has not undergone significant behavioural changes. Demand typically dips during religious festivities.
Digitalisation has positively impacted the poultry industry, particularly in agribusiness. Poultry stands out as the sector with extensive digitalisation, covering aspects such as ingredient monitoring, bird performance, and workforce management.

Would you like to share any final messages?
I advocate for demand-based production, ensuring the satisfaction of all poultry farmers. Once they are content, everyone in the value chain will thrive.