🐓 Solution to Rising Chicken Prices!
India's poultry sector worth Rs. 80,000 crore has a good reason to cheer. Here's why.
Once upon a time, India was the fourth-largest exporter of soybean meal. However, the country is now set to import 12 lakh tonnes of genetically modified deoiled soya cake.
This move impacts the farmers, poultry industry, and investors (of course!).
How did the tables turn? Read on.
First, why bother about something as peculiar as soybean meal?
Well, the cost of your poultry consumption is directly proportionate to the cost of soybean meal.
You see, soybean meal is the major source of protein nourishment for poultry animals. The feed cost accounts for 70% of the overall costs for the poultry. Further 95% of this feed expense goes into buying protein nourishments only.
The poultry sector was valued at Rs. 80,000 crores in 2015-16 and has been growing at a CAGR of 15% since the last 5 years. So if the cost of soybean meal goes up, it can heavily impact the poultry sector.
Chances are your food will also get expensive.
How did India become an importer from being an exporter?
The real soybean meal saga starts with Oilseeds.
Oilseeds are crushed to produce soybean oil and soybean meal. Now soybean accounts for 45% of the total production of India’s major oilseeds. And to protect the oilseed-producing farmers, India has trade restrictions to import soybeans, soybean oil, and soybean meal.
But the protection lent to the farmer has led to scarcity in the market. The domestic production of soybean is inadequate to meet the demand fuelled by the growing market for livestock feed.
Well, the domestic supply of oilseeds is also a problem. India’s yield is far lower than the yield of other countries:
This is because of the lack of proper irrigation techniques and the unpredictability of weather conditions.
And,
High Demand+Low Supply = High Prices (Economics 101)
But in this story there happens to be one more tadka:
High Demand + Low Supply + Speculation driven by anticipation of low supply = Super high prices!
The situation has worsened to such an extent that prices for deoiled soya meal have gone up from Rs 40/kg to Rs 110/kg. This has caused many small poultry farms to go out of business.
So it was announced that for the very first time, India will import Genetically Modified deolied soya cake. Although it’s a limited-time offer that is valid only till 31 October 2021.
This move will also have a positive impact on poultry stocks like Venky’s, Apex Frozen Foods, and Avanti Feeds since they will be able to reduce costs and increase profits.
However, this is going to be a short-term fix, no?
If the situation has to be really fixed, we need a long-term solution that protects the farmers while safeguarding the poultry industry at the same time.
Until then. Read on.
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