Prices of soybean and maize, the two key inputs that are used as livestock feed in the poultry industry, are rising sharply due to the conflict between Russia and Ukraine.
First, it was Covid, when poultry product prices fell on misconceived fears linking their consumption to the virus’ transmission. Then followed the nationwide lockdown, after which came the avian influenza outbreak of January-February 2021, which hit sales just when consumption was recovering. And just as that passed, the second Covid wave struck . And now, just as the industry was getting its feat back, feeder prices have shot up due to the Russia-Ukraine war.
The main driver of rising feed costs has been soyabean. Feed accounts for 70% of variable costs and by volumes, maize forms 60-63% of the feed while soymeal forms 25-27%. In FY2021, maize prices fell by 30% while soybean prices rose by 6% YoY.
India imports de-oiled cake — which is used in chicken feed. But imports from Ukraine have stopped due to the conflict with Russia, which is why prices have shot up. Add to that the cost of maize. Even though corn is produced in abundance in India, prices have shot up. This is because, Ukraine is not exporting corn to the rest of the world right now, and other countries have turned to India to plug this gap.With demand for Indian corn shooting up, prices have increased which has had an impact on corn feed too, another item that is used to feed chickens. Growing export of Indian corn has led to farm gate price of corn to rise from Rs 19.50 per kg to Rs 22 per kg.
“The industry is sensitive to variations in input prices, mainly feed which accounts for 70% of the variable costs. We expect industry margins to take a hit led by spike in soybean and maize prices on an average in FY2022. While many players faced net losses for H1 FY2022, subsequent softening of soybean prices following government’s actions and new crop supply provided some respite. However, recent geopolitical tensions have heated up soybean prices yet again,” noted rating agency Icra in a note.
For FY2022, ICRA expects the industry operating margins to contract sharply by 350 to 450 bps year on year as higher than normal feed prices will severely impact earnings in FY2022.
Chicken prices have also gone up 25% since January and industry experts expect a further increase of 10% to 50% in different parts of the country in March due to acute shortage of feed.
Consumers will also have to brace for unprecedented rise in prices of animal protein apart from poultry, which means dairy products and seafood too. Dairy industry leader Amul has increased retail milk prices by 4% starting 1 March in all-India markets. “This price rise is being done due to rising costs of energy, packaging, logistics, and cattle feeding costs. Thus the overall cost of operation and production of milk has increased,” said Amul in a release.
Mother Dairy too announced a price hike of Rs 2 from 6th March.
