Sudipto Haldar and Dinesh T Bhosale
AB Vista South Asia
The current position where the Indian poultry industry stands as of now is perhaps in the doldrums. It seems to be an exaggeration considering the still high input of the poultry sector to the agricultural and livestock sector GDP and the national GDP as well, but a deeper insight of the situation may speak in support of the statement above.
Let us revise what the statistics says about the current position and future prospects of the Indian poultry industry before zooming in onto the actual points of the uncertain areas.
The world scenario – a brief overview
The world population in 2010 stood at 6.9 billion and is expected to rise to 8.30 billion by 2030. World’s total production of poultry meat during 2010 was approximately 95 MMT where the share of Asian and South American continents are steadily rising (52%) while that of North and Central America and the Europe are shrinking consistently. Global growth in egg uptake has been remarkable and in this segment too the contribution of the Asian countries stands at more than 60%.
The number of undernourished people in the world remained unacceptably high at 0.93 billion in 2010 although slightly lower than 1.023 billion during 2009. At present more than half of the world’s protein energy malnutrition problem is in South Asia; and a larger number are estimated to remain malnourished even by 2030. This shows that despite the boom in production during the last decades the basic problem still remains to be resolved. Nevertheless, poultry industry does have enough potential to contribute significantly in alleviating the problem of malnourishment in the Indian subcontinent and elsewhere in the world.
Poultry production has been the most dynamic sector of animal production worldwide. Diets are expected to change in favor of products of animal origin particularly the poultry products due to cost competitiveness and high nutritional value. Although the rate of increase for poultry meat production worldwide is much faster than that of other competing proteins, it would be prudent to take into consideration the factors which might have decelerated the growth rate.
The global scenario is quite uncertain
In the last couple of years the poultry industry has experienced heavy investments especially by the Asian countries and India is not an exception in this drive. Despite this, the growth rate of global meat production was 100 million MT in 2011 which was just the half of the growth rate experienced in 2010.
One of the major factors behind the uncertainty was of course the resurgence of Avian Influenza in Bangladesh, Cambodia, Egypt, Hong Kong, India, Indonesia, Japan, the Republic of Korea, Mongolia, Myanmar, and Vietnam.
The other factor which put a brake on the growth process of the industry worldwide was definitely the skyrocketing ingredient prices. Although Brazil, China, the USA and the EU are the countries considered to be the greatest sufferer from the high ingredient prices, India was not an exception. Had the prices of raw materials were well within control then the impact of avian influenza outbreak would have been cushioned to some extent.
It is quite fascinating to note that the avian flu epidemic failed to create any impact on global egg consumption. Asia Pacific, especially China and India, dominates the global eggs market with China contributing almost 40% of the global produce of eggs each year. There is no doubt that this has buffered to some extent the negative growth pattern of the overall poultry industry.
The Food versus Fuel controversy
It was an alarming situation for the poultry feed industry in the US when the National Chicken Council in the USA noted that in the first time in the history the year 2011 experienced that more of the American corn would be going into ethanol production than into livestock feed. Such trend would be a jolt for the animal feed manufacturing industry worldwide for obvious reasons. Fortunately this cloud of uncertainty did not last long but had it been continuing for long then the impact could be devastating with steep hike in corn price worldwide. The likely impact is discussed later in this paper.
High input cost affected feed production
World compound feed production for all species by industrial feed mills in 2010 increased by about 1.4%, to a new record of approximately 718 million metric tons. Further growth in 2011 has been constrained primarily by high feed grain prices globally, although Asian countries have continued to deliver extra volumes to meet local requirements.
Increases in ingredient costs have again been a major consideration for poultry feed manufacturers around the world. One estimate from the USA was that the rise in the maize price quoted on the Chicago Board of Trade, the equivalent of $315 (~ INR 16000) per metric ton, would add almost 17 cents (~ INR 9) to the production cost of each kilogram of chicken.
The annual report of U.S. top poultry company Tyson Foods noted that corn and soybean meal represented about half of the cost of growing a chicken. American chicken company Cagles Inc. said in its report for fiscal year 2011 that its feed cost had risen by 18.5% year on year, driven by a 75% increase in the cost of maize, or corn.
Price escalation of raw materials has loomed the Indian poultry industry as well and the situation is confounded by the increase in export volumes of corn and soybean from India. At present soybean meal price in Indian markets are hovering around RS 32000-35000 per MT and with no other good quality alternative available, the small and medium scale poultry farmers and feed manufacturers are in danger of extinction.
The price escalation of soybean, however, is expected to increase India’s soybean planting by 7% in 2011/12 crop year. With majority of the soybean planters planning to put their produce in the oil extraction industry, it is may be expected that the rise in production will help in curbing the skyrocketing of the price of the soybean meal going to the poultry feed industry.
The world’s EXIM scenario
Brazil, USA, and Netherlands are the major chicken meat exporting countries together accounting for over 72% of world’s chicken exports whereas Russian Federation, Hong Kong, China, Saudi Arabia and Japan are the major chicken meat importers together accounting for about 40% world’s chicken imports. Similarly, Netherlands, Spain, Germany and China are the important exporters of hen eggs together accounting for about 50% world’s hen eggs exports whereas Netherlands, USA, Germany and Spain are the major egg importers with a total share of over 51% of the world’s egg imports.
Where does India stand?
Among the Indian livestock based vocations, poultry farming occupies a pivotal position due to its enormous potential to bring about rapid economic growth with low investment (??).The Indian poultry sector with 7.3% growth in poultry population, has witnessed one of the fastest annual growth of about 6% in eggs and 10% in meat production over the last decade amongst all animal based sectors. This puts India amongst the top 5 countries in the world in terms of egg and meat production. Factors driving the industry’s expansion include quickening growth in per capita incomes, a young and increasingly urban population, and declining real poultry prices. With studies suggesting that most Indians do not have strict vegetarian dietary preferences, income and price are likely to continue to influence rising demand.
The expanding role of poultry integrators, primarily in South and West India, has contributed to declining poultry prices and future industry expansion depends on the pace at which integrated poultry operations spread in the West, East, and, particularly, the affluent North. Fortunately this is what happening and some big players in the integration markets are emerging at nice pace to feel their presence on a pan Indian basis.
The organized sector of Indian poultry industry contributes nearly 70% of the total output whereas the rest emanates from the unorganized sector. The broiler industry is well dominated in the Southern states accounting for nearly 60-70% of total output. Similar is the case with the layer industry which is well developed in the states of Andhra Pradesh, Tamil Nadu and Maharashtra contributing nearly 70% of the Country’s egg production.
The prevailing uncertainties
Regional imbalance in demand of poultry products
Regional imbalances in poultry production are inevitable since both large commercial egg and broiler production farms are mainly confined to the Southern states, apart from Maharashtra, Punjab, Uttarakhand and Haryana in the North. More than 60% of eggs are produced in Andhra Pradesh, Haryana, Maharashtra, Punjab and Tamil Nadu, whereas more than 60% of poultry meat is produced in Andhra Pradesh, Karnataka, Maharashtra, Punjab and West Bengal. Although broiler farming is gradually catching up in some Northern, Central and Eastern regions of the Country in the recent years, the status lags far behind to remove the skewness in the production pattern. The commercial poultry farming is yet to make a significant dent in some of the most populous states like Bihar, MP, Orissa, Rajasthan and UP.
This disparity in production is perhaps the most important contributing factors towards the uncertainty that the industry is facing now. Had there been an equal demand of poultry meat and egg throughout the nation, the growth of the industry would have been taken place accordingly.
Transition from live-bird-market to frozen-product-market
Expansion of poultry sector integration, in turn, may depend on the pace of transition in India’s poultry sector from a live-bird market to a chilled/frozen-product market. Live-bird sales now dominate the market, preventing exploitation of regional comparative advantages in production, or the use of storage, domestic product movements, and international trade to stabilize supplies and prices. A shift to mechanical, and more hygienic, processing that would be an integral part of a transition to a chilled/frozen-product market may also have public health benefits, although there is little evidence that current practices are creating health problems. Nevertheless, a new regulation has been notified in May 2011 under the Food Safety and Standards Act which calls for complete modernization of the abattoir industry for production of quality and safe meat.
There are 30 export-oriented modern abattoirs and 77 meat processing plants registered with Agricultural and Processed Food Products Export Development Authority exporting raw meat (chilled and frozen) to about 56 countries. However, the focus area is definitely not the poultry meat. It is mainly the buffalo meat that has been increasing at the rate of 8% annually during the last five years and is now expected to touch 3.5 million tons. On the contrary, export of poultry products came down to RS 37.2 billion in 2009-10 from RS 42.2 billion in 2008-9. Nevertheless, being located at the center of many meat and poultry product importing countries (Afghanistan, Oman, UAE, Qatar, Kuwait, Pakistan, Maldives, Liberia and Bahrain) Indian export of meat and processed egg products are likely to see a considerable rise in the coming years. The launch of a comprehensive financial scheme, the modernization of existing abattoirs/establishment of modern abattoirs, under the 11th five year plan (2007-2012) by the Ministry of Food Processing indicates how keen the Government is to trap the profit from this segment. According to one report from the USDA in early 2012 uncertainties are prevailing in the major poultry meat exporting countries like Thailand and China where outbreaks of avian influenza have shifted most of their exports to fully cooked products, and are projected to continue to do so. Because of higher production costs, these cooked products will be marketed to higher income countries in Asia, Europe, and the Middle East. This factor may be a good opportunity for India to boost its export of poultry meat products.
Government policies, bird flu and usage of antibiotics
With the expansion of India’s poultry industry, the Government of India has adopted norms to address a number of new issues, including economic tradeoffs between poultry producers, feed producers, and consumers, potential public health concerns associated with traditional slaughter and marketing practices, and appropriate tariff and nontariff policies for imports of poultry and industry inputs. Government policies have always been in favor of giving priority to promoting self-reliance in agricultural products, it is unclear how future policy will weigh the competing interests of, among others, poultry and egg producers, consumers, and feed producers. Decisions taken on a whim on import policies may severely impact the poultry industry growth since such policies are going to affect the import of most of the costly feed additives, the comparable products of which are perhaps not available in the Indian market.
There are reports that the US eyes on to capturing the growing market for chicken legs in India once the dispute over import restrictions imposed by the Indian Government on poultry products from countries reporting outbreak of low-intensity bird flu, is settled by the World Trade Organization. This may not be too good for the Indian poultry producers.
In 2009, India amended the avian influenza rule to allow imports of processed poultry products subject to a “conformity assessment.” Under the conformity assessment, processed poultry may be exported to India if the requirements outlined in the conformity assessment are met by the exporting country. At present India does not import poultry and poultry products. Although India does not impose any quantitative restrictions on imports of poultry meat, restrictive sanitary import regulations and high tariffs are high barriers for poultry and poultry product exports to India and prevent almost all imports.
In fact bird flu has a devastating effect on Indian poultry industry especially in its domestic sector. When it appeared for the first time in the year 2006, poultry consumption in many areas where the disease outbreak was not there people stopped consuming poultry products. Perhaps this is the major uncertainty factor which is still haunting the industry.
An aggravating factor in managing infections is the high market share of one breed each in broilers and layers. In Broilers, the Vencobb breed is estimated to have over 70% market share and in Layers the breed Babcocks have over 80% market share. Though other breeds like Ross, Hubbard and Marshall in Broilers and in layers Bovan, Lohmann and Hyline 98 are now increasing their shares, the predominance of a breed provides an environment that is prime for rapid spread of diseases with the parasite adapting quickly to the weaknesses of the breed. It is very important for the industry to look at diversifying breeds and bringing in more technologically advanced breeds into the country.
According to the Indian Health Ministry the usage of antibiotics in meat and egg producing chickens may be shortened. For the first time a timeframe has been constituted for food-produced animals and marine products to be kept off antibiotics before they enter the human food chain. Under the Drugs and Cosmetics Act, the ministry stated that the withdrawal period shall be less than seven days for egg and milk, 28 days for meat from poultry and mammals, including fat and offal, before they enter the human food chain. This means that indiscriminate application of antibiotics will come to a halt. This opens up another window of challenge for the poultry producers who must pay more attention to ensure stricter bio-security measures at the farm levels.
Depreciation in Indian rupee
The current depreciation of Indian rupee against US dollars is putting the industry in front of severe uncertainties further. With the rise in the import price of many of the feed additives are becoming costlier. However, the overall position of the poultry industry does not possess enough cushions to absorb the impact of this extra cost. It is beyond the scope of this paper to discuss if anything can be done by the industry to safeguard the interest of the feed manufacturers and the poultry producers from the negative impact of currency depreciation.
Poultry sector integration can yield substantial benefits for the sector and, particularly, consumers of poultry meat. Feed shortages, however, can have significant adverse effects on producers and consumers of poultry meat and, particularly, eggs. Although Indian corn producers may gain from higher prices associated with import restrictions, these gains must be weighed against losses to producers and consumers of poultry meat and eggs, as well as to the potential international competitiveness of Indian poultry production. Development and adoption of technology that can improve the competitiveness of domestic feed production would allow all producers and consumers to benefit from poultry sector expansion.
Raw material prices
The increasing raw material prices are perhaps the greatest threat to a sustainable poultry production in India in the recent years. Keeping aside the quality issue of the raw materials, the rate at which the prices of most of the raw materials are increasing is worrisome. Price of soybean meal, the major and perhaps the only source of protein for the Indian poultry has increased by more than 75% in the last couple of years. The problem is confounded by the fact that there is no alternative protein source the producer can take resort to. With the rising prices of synthetic lysine and methionine due to a depreciating rupee on one hand and the rising price of the chief protein source, the Indian poultry industry is perhaps facing the worst ever problem in formulating feed fulfilling the minimum nutrient requirements of the flocks. As a result, feed manufacturers are rather forced to formulate diets by compromising in terms of nutrient density and this in turn is hindering the birds to attain their full genetic potential. In other words the industry is paying higher premium for the raw materials and in return getting fewer dividends owing to compromise in production potential.
This in fact may become a major threat for the indigenous poultry producers. With such a high level of uncertainty looming over the industry, the producers have no other option but to increase the price of their produce. Still, enough price competitiveness is there in terms of the price of the raw poultry meat which is not allowing the big foreign players to operate in a large scale in the Indian markets. However, if these uncertainties do not come to an end then there is enough chances that Indian poultry products loses the price competiveness they are enjoying now and the indigenous producers succumb to the big pan Indian operators or the multinational players. To keep the small and the medium scale producers from becoming perished the problems have to be sorted out as soon as possible.
Lack of human resources
The Indian livestock industry as a whole and the poultry industry in particular is facing a daunting future due to the shortage of technical personnel, including veterinarians, researchers, nutritionists, and para-veterinarians in several critical areas where specific expertise knowledge is essential. This workforce is extremely essential. Unless qualified manpower is there, the industry may not compete globally. Globally, the advancement in poultry science is too rapid and to be competitive in the world market the persons at the helm of affairs of this industry must keep themselves abreast of these advancements. This is possible only when the technical knowledge generating in the labs across the globe reach the industry and find an application. The technical workforce should work as a bridge between the lab and the industry. Unfortunately, there is a real dearth of such a workforce in India. Young vets are not finding the jobs in the poultry industry. According to an estimate the poultry sector can absorb nearly 200,000 new hires over the next five years. However, with the current trend continuing, it will perhaps remain impossible to find this workforce for the industry.
Despite the price edge the multinational competitors, the Indian poultry industry is not in a position to extract the full benefit of it in the international market. Even in the domestic sectors, marketing of the poultry products sometime faces severe problems. In the absence of orderly marketing network, sufficient regulated markets, lack of adequate cold-chain and warehousing facilities etc, the wholesale prices of poultry products suffer violent fluctuations and often become un-remunerative, due to cyclic boom-and-bust phenomena. The poultry marketing is largely in the hands of commission agents and private traders. Procurement in remote places receives low priority. Despite growing non-vegetarianism and demand potential for poultry products, consumption growth has not been able to keep pace with the production growth due to low purchasing power of people especially in rural areas. Fragmented and remote rural markets also restrict reach of commercial poultry products to the far flung rural areas. Strong marketing network covering the entire country is needed to set the industry free from the clutches of middlemen.
Limited acceptance of processed poultry products in the domestic markets is yet another constraint restricting capacity utilization of already established processing units and further investments in this area. Only about 4-5 % of table eggs produced in the country are presently processed. Wet marketing of broilers is still preferred and is widely prevalent in the country in the absence of general awareness about food safety and quality, and statutory provisions to restrict the same. The product quality and safety issues are now of paramount importance in the wake of WTO not only to promote poultry exports but also to save the domestic markets from the onslaught of imported poultry products owing to open market access and trade liberalization policies.
Onslaught of poultry diseases
In the recent past, Indian poultry sector has faced frequent onslaught of newer poultry diseases like bird flu (Avian Influenza) leading to enormous losses to the poultry sector not only in India but globally. The total losses to the Indian poultry sector till 2009 have been estimated to the tune of over Rs. 2200 crore (?? Or more – I am not sure about the exact figure sir). Every reported case of outbreak of AI leads to distortions not only in the domestic demand and consequently in prices but also in global trade.
Even at present the industry is facing severe problem with high mortality rate which sometimes reaches to the level of 100 % of a flock. The main problem with this mortality is indeed obscure. One school of though says that this is due to a slowly mutating variant of the avian influenza virus. If this is the fact, then the future becomes more uncertain because still there is a dearth of a vaccine which can combat this slow mutating variant of the avian flu virus. The prevalence of this virus is making the flock severely immune compromised and is paving an easy way to other diseases like Newcastle disease or infectious bursal disease. The producers are really in a fix about how to face this situation. It not only drains out their money on account of vaccines and medicines but also posing them to high risk of production losses.
The dubious status of the Indian poultry industry due to the uncertainty factors looming over for the last few years notwithstanding, there is still scope to have a comeback. It is noteworthy, that such uncertainty factors have not perhaps percolated to the level of the consumers to that extent. However, to protect especially the lower and the medium strata of the industry from being perished, an overwhelming drive is perhaps required from all the corners. Continuous persuasion with the policy makers at the Government levels should continue in one hand to ensure sufficient safe guards for the industry, while on the other hand, producers need to be made aware about the importance of bio-security and sanitation norms as well the importance of automated environmentally controlled housing systems. One should remember that ensuring sufficient bio-security measures disease related uncertainty can be solved to a great extent. On the other hand, an automated environmentally controlled housing system not only guards the flock from inevitable infections but also help them to attain performance close their genetic potential. There is perhaps no other way but to opt for these options to fight the increasing raw material prices because it is only this measure which can provide the producers with sufficient cushion against the threats posed by the uncertainties looming over the poultry sector.
[Content courtesy : Livestock Institute for Knowledge & Excellence (LIKE) E-mail: email@example.com]
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