ICRA Limited (formerly Investment Information and Credit Rating Agency of India Limited) stated in a report on Monday that a increasing in demand coupled with improved and satisfactory feed costs will help allow poultry industry players to post healthy earnings for financial year 2020-21.
The sector had taken a beating after shoppers shunned poultry merchandise as rumours of hen consumption linking to the unfold of Covid-19 had impacted the offtake.
Therefore as profitability bounces again to pre-Covid levels, ICRA has revised the credit score outlook to positive from negative for the poultry sector.
Since June 2020, the shift in the business scenario for the better has resulted in realisations that are currently at an all time high, which lends support to profitability. In addition, premature chick culling and lower chick placement during Q1 FY2021 reduced market supplies, which helped to increase realisation during H1FY2021 throughout all regions,” stated Ashish Modhani, Vice-President, ICRA.
Feed accounts for about 70 percent of the variable costs for poultry players in terms of input costs, with the balance comprising the expense of day-old chicks (DOC) (20 percent); and the remaining cost of medical treatment, labour and fuel. Maize accounts for 60-63% of feed prices, while soymeal accounts for 25-27%, with rice bran oil, de-calcium phosphate and other micro nutrients remaining.
During Q4 FY2020, maize prices decreased to Rs 13/kg and are now floating around Rs 14-16, below the MSP of Rs 18.5/kg as well as below the weighted price of Rs 20-2/kg in recent years. The earlier expectation of stabilising maize prices following government intervention in Q2 FY2021 did not occur, so continued soft prices improved profitability for players, the report said.