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India's Poultry Industry Outlook is Bright

by 5m Editor
11 June 2010, at 7:20a.m.

INDIA - The country's poultry industry has been through hard times but stakeholders are looking ahead with optimism.

After going through a trying period, the poultry sector is now on a roll, according to The Hindu Business Line. The price of an egg has stabilised around 2.75 rupees (INR), while broiler producers are witnessing good profits.

Broiler producers were, in particular, affected last year due to a variety of reasons, including the Kerala government's decision to slap a higher value-added tax on poultry products import. It hurt even established players in the sector.

All that seems to have gone-by now with the producers move, in particular, to cut production in the wake of fall in demand last year paying off. For example, live birds are quoting at INR60 per kilo, higher than the production cost of INR45.

Not just that, farmers are getting huge orders for growing birds.

The poultry industry is showing promise. The INR400-billion plus industry has transformed itself from a mere backyard agricultural activity to a profitable, dynamic commercial industry.

One of the fastest growing segments of Indian agricultural sector, its growth is driven by an increasing urban population, a growing middle-class with increasing per capita and disposable income apart from rising cereal prices and stable poultry prices.

Companies such as Venky's India, Srinivasa Hatcheries, SKM Eggs and Hester Biosciences are the ones that could benefit investors. A word of caution, however, is that these companies' fortunes are linked to the poultry prices and industry.

According to The Hindu Business Line, India, with a poultry population of 489 million and estimated more than 532 billion eggs production, ranks among the top three countries in egg production in the world. While the production of agricultural crops has been rising at 1.5 to 2.0 per cent a year, the broiler production is growing at the rate of nearly eight to 10 per cent every year and growth in production of poultry/chicken meat increased from mere 0.12 million tonnes in 1981 to 2.2 million tonnes presently. The annual per-capita availability of eggs and chicken meat has also increased from a mere 10 eggs and 146g in 1970s to around 43 eggs and 1.6kg respectively and is set to double by 2015.

The changing eating habits and growth of fast-food outlets and quick-service restaurants speak highly in favour of improvement in levels of poultry production over the next many years.

The poultry industry has suffered major losses with problems such as bird flu, spiralling costs of feed materials such as maize and soya because of low production. Going by the Met Dept outlook of good monsoon this year and with the crop cycle improving for these crops coupled with a rationalisation of prices, this industry holds promise although a word of caution that though livestock is an industry where diseases such as avian flu can mar the best laid plans.

With the prices of pulses, a cheap source of protein, ruling high, consumers are now turning to poultry for their health needs. The sector will stand to gain as long as this trend continues.

Hyderabad-based Srinivasa Hatcheries was in the red last year due to a spurt in rising input costs and avian flu threat, reports The Hindu Business Line. However, this year it has bounced back with a PAT of INR79 million for nine months, as against a loss of INR6.8 million in the corresponding period of previous year.

A fully export-orientated unit with its base in Erode, the company manufactures egg powders for the confectionery and fast-food segments. As an EOU, the biggest risk associated with SKM these days is the currency fluctuation.

It is currently ruling at INR18.60 posting a 3.3 per cent gain over previous day's close. Although billed as the most prominent player in the egg powder segment across the country, there is no word of dividend.

The Ahmedabad-based poultry vaccines manufacturer has shown a good performance over the years. Although its sales dropped in financial year 2008-09 on low demand as poultry units slashed their production owing to sluggish demand, Hester should be able to do well in the coming days on the impending growth in poultry industry, reports The Hindu Business Line.