First eggs. Next will be chicken.
If Asia's biggest poultry producer is right, cheap chicken is a fleeting luxury. Just as egg prices have doubled in India, chicken prices are next.
A recovery will be a relief to poultry producers, who have seen prices sink to Rs 63 for 2-2.5 kilograms from Rs 71 for chicken.
Venky’s India Ltd. Managing Director Venkatesh Rao didn't give a forecast for how much prices may rise, only that a current decline is unlikely to last as winter meat demand increases.
Here’s the full conversation.
What is going on with the chicken prices?
The industry has gone through a bad scenario from last three to four years, whether it is layer or broiler industry, whether you produce eggs or meat. This is because of availability of raw material and over expansion. But the rates have come back after four years. From last nine months, it is doing good. But again in Maharashtra, the rates are fallen. I don’t know what kind of information you have but it looks like now we have a smooth ride.
Can you run us through rates?
The egg industry has been going through a heavy loss. This is the first time, the poor farmers are making some money. The breaking is itself Rs 3. For the first time, these poor small farmers are making money. Pricing of the Chicken is because of the over production. Suddenly, everyone sees glut in the market and scientifically selling according to markets requirement. The chicken is coming basically from rural areas. In Bombay, if it can take 10 lakh, but it is 15 lakh. So, you will have fall in price.
Is this rise in prices for chicken seasonal or structural?
It is a small game that everyone sees that prices are good, and suddenly everyone wants to produce it. The farmers have twin businesses, they have agriculture and poultry. So, they see rise in the poultry and want to over expand. You should be expanding 8-10 percent per annum. In per capita, for production India is in 3rd number and we have still 30 years to go. So, there is a huge scope, but it has to be done scientifically and you have to work on both the lines.
What will be the further trajectory for prices?
It is seasonal. The consumption will go up again during the winter season. Farmers, traders and industry will come together as they come in and then I think there will be rise in the chicken rates again. Also, because of the availability of raw materials like maize and soya, which is 75 percent chicken feed.
What has been the raw material cost situation?
The government has been kind and helping on the policies. The ranges are good. Soya production will be good. So, everything looks like a win-win situation till now and few months to come.
How the large players in the sectors will play at the cost of unorganized players? Is this sector ready for the shift from unorganized to organized players?
The trend is coming slowly but it is long time. Still, housewives like fresh chickens and it’s not like of Europe or America. So, it will take at least 10 years for the shift.
What are your plans to consolidate market share?
The unorganized sector is of small farmers which are coming up by developing themselves and we are the chicken producers. So, when we have the layers and broilers which we produce and breed and with us, our guidelines are there for it. Our services are there 24/7 for all over India. There are huge American chains which already have quality control in KFC, McDonald’s, etc. Many are taking from our Davangere plant which is most sophisticated plant in South East Asia. So, there are two sectors here and we are trying to handle and make it through the situation. Getting the technology set in rural area, which we have, will take time. In India, poultry is the only sector which is growing well. If you take other sectors, they are not going so well. Thanks to Mr. PV Rao, father of Indian poultry, we are following it strictly and getting new collaborations and technology and see the results that we are producing. We are equivalent to the American standards.
What is your capacity addition plan?
It if going to be slow as compare to developed sector because of the fast food change and when software area is going to develop. The consumption is going to go up slowly. Because the country is changing, the situation is changing. We hold 80 percent of market in chicken production and 75 percent in egg market. It is two different combination. To develop sector will take a while. It is not going to be up by 3 percent to 15 percent in a giffy. It is like all the players going and playing but as the team leaders, we are trying to guide and give best quality. It will be somewhere around 10 percent in next two years.
So it will take the next 2-3 years to go from 3 percent to 10 percent?
I am talking about the overall production. Event the competitors will take from us. If they are showing the finished numbers at 3-4 percent, the producers are us who are producing the chickens breed. So, we are holding breed of BV300 is holding 80 percent and Vencobb is holding 70 percent of market overall India. So, if the competitors are taking they are taking from us. In the overall, we are 3 percent for Venky’s. But for Venkateshwar, we are holding 70-80 percent in Indian market.
How will the third quarter and fourth quarter look like?
It is very difficult to predict in the poultry market because it depends on raw material, prices, consumption, production. Last 9 months, it has been good. So, I can’t give you the exact figures, but it’ll be good.
The street is working numbers of Rs 2,700 crores of topline for this financial year and touching the Rs 3,100 crore mark in the next financial year. Are these safe estimates?
They are safe estimates because the backup is good. There is going to be consumption. But, I don’t know how much the analyst understand the industry.
Where are you poised in growth rate chart?
The chicken is one of the most protein diets and everybody is turning into it. Its fresh. The government is also supporting on those lines like midday meals. In per capita income whether its is chicken and meat production, there is 20 years gap. If we see consumption with China and Americans, we stand third. But the gap is too much. If the Chinese are producing 250 chicken per capita, then we are consuming 83. So, there is huge gap. There would be immense scope but it depends on raw material, pricing, how the farmers produce. I hope they produce scientifically and don’t go overboard seeing the money. There is huge scope.
Will the second half will be better than first half?
I hope it will be the same.
Is there a chance that it’ll be worse than the first half?
It depends on raw material pricing.
Is there visibility on raw material pricing?
That’s why I am saying it will be the same, because the production will be good, rains are good., stocking is good. Everything is good. So, I think it will be the same.