Kerala has declared a poultry hartal from Thursday as traders, dealers, vendors and eateries ‘chicken out’ blaming a price spiral. The implications are too large to miss. Or consider this.

Kerala consumes 2.4 lakh tonnes of poultry meat every year. This alone makes for a market of Rs 3,360 crore in size. Internal production is just 90,000 tonnes, explaining the dependence on outside sources.

The market for eggs is estimated to be Rs 1,800 crore. Together, they make for a massive annual demand of Rs 5,400 crore. This is too big an opportunity for the private trade monopoly to lose sight of, much less concede.

Or, are suppliers from across the inter-State border leveraging this to engineer hike in prices? V. Sukumaran Nair, marketing manager of public sector Kerala State Poultry Development Corporation (Kepco), suspects this is the case.

supply cut

But broiler producers in Tamil Nadu say they are increasing prices because of costlier raw material and also to compensate the losses that the industry suffered after the recent avian flu outbreak in Bangalore.

“With that bird flu incident, Kerala – our major market– imposed a temporary ban on the poultry products and export market too witnessed a setback. Hence, most of the farmers went for a supply cut – at least a 25 per cent cut in supply from last year. Kerala imposes service tax on chicken from Tamil Nadu, thus escalating the costs further,” said C.R. Selvakumar, DGM- Tamil Nadu, Venkateshwara Hatcheries.

Nair said that KFC and other eateries may now pick fresh birds from Kepco farms, till now open only to individual consumers.

To add to consumers woes, the Kerala Hotels and Restaurants Association (KHRA) has decided to drop chicken from its menu, citing exorbitant price as a reason. Prices of chicken supplied mainly from neighbouring Tamil Nadu has gone up to Rs 170 a kg from the average Rs 105-120 few weeks ago. Live chicken is now priced at Rs 115-120 a kg against Rs 70-80 a month ago, while dressed chicken is in the range of Rs 160-170.

Jose Mohan, General Secretary of KHRA, alleged that the prices were being manipulated by middlemen.

As much as 80 per cent of the chicken brought to the State was consumed by hoteliers and caterers.

input costs

According to Balram S. Yadav, MD, Godrej Agrovet, chicken prices have gone up marginally to mitigate the loss that was incurred by farmers during July-December due to over production of poultry. Also considering the high cost of production the current prices are justified.

“Currently, the cost of product per bird at the farm level is about Rs 50-60, while the selling price is around Rs 60-70 in Maharashtra. A live bird costs about Rs 80-90 a kg in the market while a dressed bird costs Rs 130-135.

Subba Raju, Zonal Chairman of NECC (National Egg Coordination Committee), said that in Andhra Pradesh to keep the cost of production in control, poultry farmers reduced capacity by 20 per cent. “We reduced it with self-discipline. We are getting a farm gate price of Rs 75-83 a kg (live). The break-even is put at Rs 60,” he said.

Feed costs account for one-third of the total production costs and currently a 75-kg bag of broiler feed is ruling at Rs 2,458 against Rs 1,805 in the same period the previous year, said Selvakumar. The cost of feed has gone up due to increase in prices of soyameal and corn, used in the feed. “Farmers had to sell poultry at a price 30 per cent below production. The hike will not impact the consumers,” Yadav said adding that the chicken consumption has been doubling every 6-7 years.

In 1999, the per capita chicken consumption was 1.2 kg which has increased to 4.2 kg in 2012. It is set to increase further, Yadav said and added that India is a protein-deficient market and chicken is a cheaper source of protein given the fact that the prices of pulses have soared.

“We are expecting annual price of Rs 110 a kg for consumers. There is no possibility of it coming down, with the cost of production hovering at Rs 90-95,” Raju said.

quick foods chain

An executive of Venky’s, the fast food venture of Venkateswara Hatcheries, said that the demand was growing, particularly for the Just-in-a-Minute brand products. The rise in prices will not affect institutional buyers such as McDonalds, KFC or other such quick services restaurants as they usually go for annual contract purchase agreement. Asok Ram, CEO, SFC Plus, the Fried Chicken Restaurant in Kerala, said eatery was not directly affected by the local price hike in poultry. This is because it has a standard rate contract which is higher than existing rates. SFC is directly sourcing from Coimbatore and is adhering to stringent norms to ensure quality of product.

P. Selvaraj, Zonal Chairman of NECC-Namakkal, said that with seasonal uncertainties and austere months coming to an end, consumption will gain momentum in Tamil Nadu and other markets and will stay in the same level as the demand for animal protein is high during summer. This will offset any slack demand from Kerala.

Meanwhile, the Kerala Broiler Coordination Committee has demanded reduction in tax rates imposed by the State Government on poultry products. The 13.5 per cent of tax coupled with rise in poultry feed prices has affected production leading to the price rise.

(Vinson Kurian with inputs from Sajeev Kumar, Kochi; Gayathri G., Chennai; Priyanka Pani, Mumbai; and K.V. Kurmanath, Hyderabad)

(This article was published on February 5, 2013)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.