India’s Poultry Sector Set To Return To Profits: ICRA

The domestic poultry industry is expected to post healthy profits during FY21 after a near washout in profits in FY20, ratings agency ICRA said.

The ratings agency said that domestic poultry industry bounced back smartly since June 2020 after grappling with a tough period in the last two months of FY20, amid rumours of chicken consumption’s linkage to Covid-19 leading to sharp decline in broiler demand and realisations.

In a note, ICRA said that the healthy rebound since Q2FY21 will enable players to post healthy profits during FY21 after near washout in profits in FY20.

The trend, the ratings agency said, is likely to be well supported by improved realisations and modest feed prices.

“Most of the players had reported net losses in the previous financial year with several smaller players going bankrupt, due to fall in consumption, high feed prices and modest realisation,” said Ashish Modani, Vice President, ICRA.

“The change in industry scenario for the better since June 2020 has resulted in realisations being at an all-time high currently, this lends support to profitability. Also, premature culling of chicks as well as lower chick placement during Q1 FY2021 restricted supplies in the market, which helped in improvement in realisation across all regions during H1FY2021.”

In terms of input costs for a poultry farm, the note cited that feed forms 70 per cent of its variable costs with the balance comprising day old chicks (DOC) cost (20 per cent), and medicinal care, labour and power costs making up for the rest.

Besides, the note said that within feed costs, by volume, maize forms 60-63 per cent while soymeal forms 25-27 per cent, with the rest being rice bran oil, de-calcium phosphate and other micro nutrients.

“The Covid-19 related impact on demand resulted in a sharp decline in maize prices below Rs 13 per kg during Q4 FY2020 and the prices remained soft during H1FY2021,” the note said.

Currently, maize prices are hovering around Rs 14-16 per kg which are below the minimum support prices (MSP) of Rs 18.5 per kg as also below the last years’ weighted price of Rs 20-22 per kg.

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