A rebound in demand coupled with improved realisations and modest feed prices will help enable poultry players to post healthy profits for financial year 2020-21, ICRA said in a report on Monday.
The sector had taken a beating after consumers shunned poultry products as rumours of chicken consumption linking to the spread of Covid-19 had impacted the offtake.
Hence, ICRA has revised the credit outlook to stable from negative for the poultry sector as profitability bounces back to pre-Covid levels.
“The change in industry scenario for the better since June 2020 has resulted in realisations being at an all-time high currently, this lends support to profitability. Also, premature culling of chicks as well as lower chick placement during Q1 FY2021 restricted supplies in the market, which helped in improvement in realisation across all regions during H1FY2021,” said Ashish Modhani, Vice-President, ICRA.
In terms of input costs, feed accounts for about 70 per cent of the variable costs for poultry players with the balance comprising day old chicks (DOC) cost (20%); and medicinal care, labour and power costs making up for the rest. Maize accounts for 60-63% of the feed costs while soymeal forms 25-27%, with the rest being rice bran oil, de-calcium phosphate and other micro nutrients.
Maize prices declined to ₹13/kg during Q4 FY2020 and are now hovering around ₹14-16 — below the MSP of ₹18.5/kg as also below the last years’ weighted price of Rs 20-22/kg. The earlier expectation of maize prices being stabilised following government intervention by Q2 FY2021 did not happen, thus continuing soft prices has improved players profitability, the report said.