September 8, 2010

Sri Lankan poultry industry gets back on track

After lifting state restrictions on Sri Lanka's poultry industry, production is now increasing and demand is also rising, according to Bairaha Farms.

Sri Lanka's poultry industry was badly hit by state price controls on chicken and import controls imports to 'protect' corn farmers as the expense of chicken farmers. Corn import controls pushed chicken feed prices up and meat price controls, hit farmer incomes discouraging farmers, who had stopped production from re-entering the business.

"The main challenge faced by the Company and the Group was the Governments resistance for price increase as the Government desired to control price of chicken. However, after a prolonged delay a satisfactory price increase was eventually granted in February 2010," said Yakooth Naleem, chief executive of Bairaha Farms.

Bairaha Farms, a poultry breeder and processor, said the state also relaxed its controls on corn after the crisis in the poultry industry.

"Since the Government has been encouraging the local cultivation of corn it did not allow imports in spite of the 35% cess even though there was a shortage of corn in the country during certain months of the year. However, there was a change of policy after the authorities realised that there was an acute shortage of corn in the country. A limited quantity of corn was then allowed to be imported under a special permit scheme. The current corn price is around Rs 34 (US$0.73) per kg but at one time it shot up to Rs 51 (US$1.09) per kg during a few months in the year under review due to restricted imports as well as the high Cess on imported maize," the company said.

The economies of both India and Sri Lanka lagged behind the rest of the world due to what is now called the 'permit raj'. In the 1970s when Sri Lanka reached the height of its 'permit raj', unemployment hit over 20%. Self service supermarkets in particular, which did not sell at 'blackmarket prices' were frequently out of chicken last year due to price controls.

High grain prices cause protein prices to go up by a multiple factor as a number of kilograms of grain is needed to produce a kilogram of meat. Analysts say high grain prices can not only increase the price of poultry but also the price of close substitutes like fish.

Bairaha says increased tourist arrivals are now creating more demand for poultry and demand is also coming from the North and the East of the island, after the end of a war.

"It took nearly 10 years for the Sri Lankan Poultry Industry to double its production and consumption, and now with the potential for massive growth, doubling production in a shorter period is not too far away, provided the consumption grows as expected," chairman M T A Furkhan said.

Furkhan said finance secretary P B Jayasundera had said the industry should double output within five years given the projected increase in tourist arrivals and rising incomes.