Commodity Analysis

Egg prices on a roll again

Aarati Krishnan | Updated on January 23, 2018 Published on August 02, 2015



Though costs are down, prices are holding up on good demand for this protein source

Egg prices in major Indian cities, which spiralled to ₹400 (per 100 eggs) in December last year, had moderated sharply in the first four months of 2015.

But data from the National Egg Coordination Committee (NECC) shows that they have taken off again in the last three months — rising from ₹270-280 in April to ₹330-340 by July. Egg price trends show significant divergence between cities too. While Bengaluru, Lucknow, Pune and Chennai saw an 18 per cent spike in prices in the last three months, consumers in Hyderabad and Delhi saw much higher inflation with 29 per cent and 24 per cent price rise, respectively.

The recent spike in egg prices is attributable to the severe heat-wave conditions that prevailed in the summer months this year. The unusual heat is estimated to have led to a loss of nearly five million birds in the key poultry producing state of Andhra Pradesh. This has sharply curtailed both broiler and egg supplies, pushing up prices.

India’s poultry sector produces about 75 billion eggs annually, but over half of this output originates from just two Southern states.

Andhra Pradesh alone accounts for a third of the total, while Tamil Nadu follows with a 20 per cent contribution. The states of West Bengal, Maharashtra and Haryana chip in with about 6 per cent each of the country’s egg output.

While the price spike this year has been dictated by erratic weather, egg prices tend to be quite volatile in most years on account of seasonal as well as one-off factors.

Price trends for the last five years show that egg prices usually cool off in the summer months of March-May each year and begin to go on the boil from September. The months of December and January usually mark a peak in egg prices.

This apart, events such as the incidence of Avian flu, which can require mass culling of birds, have contributed to temporary price spikes. Given that substitution between the different types of meat/protein diets is high, developments such as the recent ban on beef consumption in Maharashtra also affect demand for poultry products and, thus, prices.

Crackling demand

Over the medium to long term, the price of poultry feed ingredients, which make up nearly 70 per cent of the cost of production of poultry, also exercise a significant influence on egg prices. On this count, there is reason for domestic egg prices to remain subdued.

Maize makes up 55-60 per cent of this feed by volume and soyameal 25-30 per cent, with coarse grains, such as rice bran and bajra, used as supplements. Domestic maize prices, after more than doubling between June 2010 and August 2012, have since cooled by 44 per cent due to global oversupply and lower export realisations. Soyameal, likewise, is down 32 per cent.

However, over the medium term, Indian egg prices are quite likely to keep up at least with food price inflation (it has averaged 8 per cent in the last five years), thanks to robust domestic demand for this good source of protein.

India’s egg production has seen significant expansion in the last two decades, with overall output rising to 74.7 billion eggs in 2013-14 (the latest data) from 27.1 billion eggs in 1995-96, at a 6 per cent compounded annual growth rate (CAGR).

However, demand has still run neck-and-neck with output, since per capita egg consumption has skyrocketed in recent years. The general shift in the Indian food basket in favour of protein-rich foods seems to be fuelling egg consumption.

This may hold up egg prices, even as the outlook for the key item of cost — feed ingredients — remains quite muted for the next one year.

Published on August 02, 2015
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