Sri Lanka’s poultry industry survives amidst a dip in demand
Sri Lankan demand for chicken has fallen down during the second quarter of this year unexpectedly with the prices of both broiler and day-old- chicks (DOC) declining to a considerable level while the cost of production is rising rapidly, poultry producers complained.
Poultry Producers Forum’s joint co-coordinator Yakooth Naleem, who is also the Bairaha Group Managing Director told the Business Times that there was a lull in the market due to a dip in demand by low and middle income consumers while demand was stable among high income segments.
The reason for this situation was the buying power fluctuations among consumers with low and middle income consumers cutting down the consumption of chicken to meet their other essential requirements, he said adding that Sri Lanka’s per capita consumption of chicken per year is around seven kilo grams compared to the United States where it is around 50 to 60 kilos.
Mr. Naleem noted that the industry has experienced many months of glut and excess production, as a result of reduced demand for chicken.
The quality of poultry feed available in the market deteriorated due to high prices that prevailed in the market for raw materials, he added.
Sri Lanka’s feed prices were high and volatile, making cost of production high and uncompetitive, he said.
Margins in Sri Lanka’s poultry industry would narrow amid higher capacity and per person chicken consumption would continue to drop due to buying power issues, he said.
One of the key problems facing the industry and adding to costs is an attempt by authorities to boost local production of maize through protection, which has created some of the highest prices for maize in the world as well as shortages from time to time, he revealed.
Three Acre Farms, a unit of Ceylon Grain Elevators which is Sri Lanka’s largest day old chick producer, in its quarterly review, said that the company had continued the same level of DOC production, based on the market conditions that prevailed during the first quarter of 2014.
However, due to the unexpected downturn in the market, this resulted in over supply which adversely affected the prices of DOC and consequently increased the number of unsold DOCs.
The group’s revenue for the second quarter of 2014 was Rs. 375.6 million, an increase of Rs.2.4 million or 1 per cent, when compared to Rs. 373.2 million during the second quarter of 2013.
Its revenue for the first half of 2014 was Rs.816.8 million, an increase of Rs.70.8 million or 9 per cent when compared to Rs.746 million during the first half of 2013. This was due to better farm management that resulted in improved productivity and operating efficiency, the company said. Despite escalation in the cost of raw materials, the company and the group have adhered to the Sri Lanka Financial Reporting Standards in the preparation of the interim financial statements for the period ended 30 June 2014.