July 2, 2014

The Indian poultry industry is expected to report higher margins in the second quarter despite the volatility and wide disparity in supply-demand, although high feed costs will remain a concern.

"The outlook for the Indian poultry industry appears better for the second quarter as supplies are affected by the hot weather. The market is expected to remain volatile," Rabobank said in its quarterly report.

The INR58,000-crore (US$9.71-billion) industry was battered by higher input costs and oversupply in the first quarter. Strong performances in 2010 and 2011 had resulted in sizeable investments in capacity expansion, especially in the broiler segment, leading to oversupply.

Efforts of key integrators in the poultry industry to control supply through hatching holidays, initiated at the end of 2012, resulted in improved realisations in the final quarter of 2012-13 fiscal, although these were not for a longer period.

With feed costs accounting for 70% of total production cost, one of the biggest challenges facing the industry is the rising cost of soymeal. Its price increased 40% from US$548/tonne in January to US$780/tonne in May.

Although the industry has been experimenting with alternative feed ingredients such as bajra, jowar and rice bran, the scope for substitution remains limited. It is even feared to affect productivity. Moreover, substitutes are not cheaper, as production cost comes to INR67-68/kg (US$1.12–1.14/kg) while producers are only able to sell at INR64-65/kg (US$1.07–1.09/kg).