Poultry prices are on the rise again. According to the weekly SPI, national average broiler chicken prices rose 8.26% from the previous week to their highest level in six months. If the trend persists, the national average could once again cross the psychological barrier of Rs 300 per kg, which could cause a media backlash. If the experience of the past 18 months has taught anything, the administration should avoid any temptation to act or interfere, and let the market run its course.
The difference with the price increase this time is that it was not accompanied by a proportional increase in the price of day-old chicks (DOC). In fact, DOC prices are at their lowest level since August 2021 (after Eid ul Adha), when demand was further hampered by the short-term sickness period during the monsoon.
In fact, DOC prices may still appear higher than the long-term average. However, it should be remembered that the current price stability represents a very nascent recovery, after the high volatility observed during the pandemic which put many DOC farmers out of business and led to a shortage of parent birds.
Now that commercial demand has finally recovered – with permission to organize social gatherings of up to a thousand people in several cities – DOCs and broiler farmers are gradually seeing a semblance of profitability. Last year’s bad debt surplus and delayed collections mean market prices can stay high for some time before normalcy is fully restored.
Of course, in an ideal world, DOC prices should have collapsed after the full restoration of business activity (and stabilized at around Rs 40 per chick). However, things are still far from ideal days. Higher prices for imported grandparent birds – a consequence of both higher world prices and the depreciation of the currency – mean that the supply of chicks has not fully recovered so far. Any attempt to suppress prices at this point could sideline farmers, putting the market out of balance again.
But that still doesn’t explain the rise in broiler prices last week as DOC prices remained unchanged. The answer may lie in escalating variable costs, as the price of imported components in food has increased in terms of pak rupees due to the recent depreciation, even as soybean and corn prices have started to fall. standardize in global commodity markets.
A conversation with poultry farmers indicates that the cost per bird has reached Rs 200 – Rs 210, against Rs 235 in Lahore and Rs 240 in Karachi. It is important to stress that these figures are not independently verifiable; however, if they are correct, they do not represent an excessively abnormal operating margin.
Additionally, historical price charts show that broiler prices tend to level out at the end of the calendar year, with the December average price lower than the previous 11 month average for 4 out of 6 years. since 2015.
Either way, if prices move in a capricious way over the next few weeks, government officials should keep their horses and not react feverishly as they did in May 2021. Let the market make its own discovery. price. Don’t let the demons of 2020-21 haunt the industry in 2022.