Cattle sale ban: Poultry industry makes a killing
Profits likely to rise as feed costs are set to stay depressed while demand rises
Poultry producers are posting record profits with feed costs having dropped to a five-year low and chicken demand rising post the cattle slaughtering ban in the country. Poultry company profits should continue to rise as raw material costs are set to remain depressed and demand rises due to the political fight over cattle slaughter ban plays out in the courts. After the Madras High Court overturned the ban on cattle trading for slaughter, an industry dominated by Muslims, on May 31, the case is in the Supreme Court.
The cattle restrictions have been good for poultry producers as average broiler chicken prices in Mumbai have jumped 47 per cent so far in 2017 to Rs 100 a kg, while corn and soymeal prices, the main chicken feed ingredients, have fallen 7 per cent and 2 per cent respectively.
“For the first time, broiler prices sustained above Rs 100 (per kg) for a fortnight,” said Uddhav Ahire, the chairman of Pune-based poultry firm Anand Agro Group. “The average margin of integrated poultry firms was more than Rs 30.” Usually soymeal and corn rise during the summer as supplies drop, but this year bumper harvests and sluggish exports have kept prices in check, Ahire said.
Feed typically makes up two-thirds of poultry production costs. Back-to-back droughts that crimped grain output in India in 2014 and 2015 pressured the poultry farmers but that has changed. Shares of Venky’s, India’s biggest poultry producer, shot to a record high on Thursday after the company’s net profit more than doubled during the quarter that ended in March and full-year profit was a record Rs 1.25 billion. Poultry profits may be even higher in the June quarter on the rising average chicken prices, said Prasanna Pedgaonkar, general manager at Venky’s. Venky’s profit during the next fiscal year could rise by 32 per cent to Rs 1.652 billion, estimates Shalini Gupta, an analyst with Quantum Securities.
Feed costs should remain lower as ample monsoon rains lifted corn and soybean production in 2016/17. But farmers are also struggling to export crop surpluses as the rupee has appreciated and grain and soymeal values are pressured by a global glut.“In December we were exporting more than 300,000 tonnes, but now shipping 100,000 tonnes per month is a challenge,” said Davish Jain, chairman of the Soybean Processors Association of India.
Chicken demand has risen because of the cattle restrictions, especially in northern states where Muslims are a large minority, says Ahire of Anand Agro.
The Modi government handed down the cattle ban after BJP’s win in UP elections bolstered his power base. Even with the court suspension, cattle movement remains disrupted after incidents of vigilantes beating cattle handlers.