India’s Poultry Sector Margin to grow during 2014-15…..

Even though with unpredictable realisations, wide supply-demand disparity across regions amid high feed costs remain concern, Indian poultry industry expected to report growth of margins in fourth quarter of 2013-14 (January to March) and 2014-15 fiscal year (March 2014 to April 2015), Gurgaon based investment information and credit rating agency, ICRA said in a report, says Jagdish Kumar.

The report said domestic broiler meat volumes are expected to register muted growth in the current fiscal on the back of supply control measures adopted by the industry to support the realizations although value growth continues to remain healthy.
In spite of temporary supply mismatches resulting in demand substitution to other meat options, demand growth continues to remains healthy at 7% to 8% due to favourable socio economic factors such as changing eating habits, higher purchasing power, urbanization, increasing health consciousness towards protein rich diet, preferred meat due to religious preferences, etc over the years.

The production capacity has responded with increased integration and large scale implementation of contract poultry farming.
ICRA report said poultry sector has been 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% driven by increased domestic consumption.

Domestic poultry meat production (broiler – carcass weight) is estimated to have remained flat at 3.5 million tons in calendar year (CY) 2013 with per capita consumption of 2.8 kg per annum; while table egg production is estimated to have increased from 66 billion eggs in CY2012 to 70 billion eggs in CY2013, with per capita egg consumption at 57 eggs per annum.
In value term, total poultry market size is estimated at $9.93 billion at the wholesale price level indicating value growth of 8% over CY2012.

ICRA said that average revenue growth for key poultry integrators for fiscal year 2013-14 is expected to be 15 per cent supported majorly by increase in realizations and continual expansion in integration activities – the full year operating margins are however expected to remain under pressure even after a strong Q4 of fiscal year 2013-14 given poor realizations in Q3 of FY14 and continued high feed costs.

Buoyed by the estimated growth and margins, key integrators have invested heavily over the years with aggregate annual capital expenditure increasing four fold to $188 million during the current fiscal year period.

However, external factors like unfavorable monsoon (affecting feed ingredient prices), global corn/soymeal supply variations, threat of bird flu, etc combined with inherent industry characteristics of regional demand/supply imbalances, high dependence on wet/live market would remain key sensitivity factors.

To avoid sudden supply gluts and maintain profitable operations, it is more sustainable for the industry to control broiler meat volume growth at 5–7%.

Farmers in India have moved on from rearing country birds in the past to rearing hybrid varieties that ensure faster growth of chicks, higher eggs per bird, increased hatchability, low mortality rates, improved feed conversion ratio (FCR), and consequently more stable profits to the poultry farmers.