The Indian livestock feed market, which is majorly dependent on the demand from poultry industry, is headed for rather difficult times for atleast the next three months, as demand remains lukewarm and poor liquidity is likely to impact farmers’ capacity to fulfil payment obligations.

According to Amit Saraogi, Managing Director, Anmol Feeds, the domestic livestock feed market, which includes cattle, poultry and fish feed among others, is estimated to be close to ₹2.5 lakh crore. Poultry accounts for nearly 30-35 per cent (approximately ₹87,500 crore) of the entire animal feed market in India.

“Poultry prices were ruling firm and the demand looked good. However, post the second week of February there were rumours on social media linking chicken and egg consumption to coronavirus. This impacted the demand and led to a price crash,” Saraogi told BusinessLine .

Increased production

The price crash came at a time when the industry was witnessing a higher production. Since the poultry sector was doing well in the past 1-2 years, people went in for higher placement of birds this year expecting a good demand during the Holi season. Production increased by roughly about 15-20 per cent this year compared to the last. This further impacted prices.

“During Holi time, from March 6-15, farmers had to literally sell birds for free. This had a direct impact on animal feed,” said Saraogi.

Since farmers and integrators have not been able to make any money, this has impacted their cash flows severely.

The next three months are likely to be very challenging for the entire livestock and animal feed industry on account of poor liquidity.

“The main problem now is that of liquidity…..the farmer has no money, neither does the integrator. Whatever money for feed manufacturers is there with farmers, they are unable to pay that because of the huge losses in the poultry sector. We do not know how the cash flows will improve,” he pointed out.

Price hike

In addition, the prices of raw materials, primarily soyameal, have gone up by nearly 10-15 per cent in the last week or so. This could be because fewer plants are operational and there is a short supply. While any hike in raw material prices is usually passed on to consumers — in this case, farmers — however, the current situation makes it difficult to pass on the price hike.

“So the feed industry is suffering because we cannot pass on increased costs, the logistics cost and raw material cost has gone up,” he said.