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Looming shortage of poultry products

01 Jan 2022

 
  • Industry struggling to find $ to open LCs and clear imported goods
  • Seeks $ 25 million from Treasury to import raw materials
  • US exporters shun credit sales to local importers
  • Fertiliser policy change torpedoes attempts to source maize locally
  • Industry investment in maize productions
  • Rice mafia actions and policy changes; another blow to making animal feed
   By Skandha Gunasekara Constraints on importing raw materials to manufacture animal feed due to the ongoing forex crisis and state policies may lead to a supply shortage of poultry products and a price hike in the coming months, industry sources told The Sunday Morning. A combination of several government policies, supply issues surrounding liquefied petroleum gas (LPG) cylinder supply, and the forex shortage is pushing a once vibrant animal feed industry to the brink. Uncertainty over forex availability to import some raw materials and uncertainty of locally sourced raw material cost and availability will lead to a significant rise in prices of poultry products during the March-April festive season, the poultry industry warned.  Industry officials have requested $ 25 million from the Treasury to import raw materials.  Speaking to The Sunday Morning, All Island Poultry Farmers’ Association President Ajith Gunasekara explained that with the anticipated growth in the tourism sector and due to growing local demand, the industry had made significant investments to improve the capacity of production of poultry products. “Before Covid, around January 2020, the poultry industry upgraded its infrastructure to meet the increasing demands of the country, along with the demand created by tourism. Because of the improvements and new technology we were able to produce more, and our production costs also reduced. As a result we brought down the cost of products for consumers. At that point in time, a kilogramme (kg) of frozen chicken with skin was around Rs. 430, but in some places, we allowed it to be sold at even Rs. 400-375. Eggs were sold at Rs. 14 in the commercial markets, but in some areas we were able to bring it down to Rs. 12,” Gunasekara recalled.  The industry had weathered the early Covid-19 lockdowns in the hope that the economic situation in the country would improve within a few months, only to be met with further lockdowns last year. “But even then, we still didn’t have any issue with regard to animal feed. There was enough maize in the market, and Sri Lanka was producing its own maize locally as well. The Government had also allowed us to import corn in place of maize so that there would be no problem with regard to animal feed in 2020,” he explained.  Policy obstacles    However, by the beginning of 2021 there started to be a shortage in animal feed, as domestic production of maize reduced and the Government imposed a ban on maize imports due to a policy to promote local production, resulting in the poultry industry being unable to import the necessary maize to fill the shortage in domestic supply.  “Therefore, the All Island Poultry Association decided to invest in maize cultivation. The Government too assisted us in this and gave us concessions and land to cultivate. We (the association) met with leading maize cultivators and promised them that we would buy all their stock and pushed them to increase the production,” he said, adding that there is an annual requirement of 600,000 metric tonnes (MT) of maize to be used in animal feed in the poultry industry.  However, only around 300,000 MT of maize is produced domestically every year, which leads to a shortage of around 300,000 MT that needs to be filled through imports.  “To fill this gap we imported 200,000 MT of corn in 2021. As a result, we were able to somehow continue our productions for this year, and did our best to control the prices. What is gazetted is a kg of frozen chicken with skin on, which is now sold at around Rs. 460 per kg,” he noted.   Further, Gunasekara stated that in the last two to three months there was a shortage in rice bran, which is also used for animal feed, due to large scale rice mill owners hoarding paddy and not processing it into rice.  The processing of paddy into rice creates rice bran.  “Earlier, a kg of rice bran was Rs. 35, and now it’s around Rs. 85. But even then, there is no rice bran. Then the Government decided that rice and rice bran should not be used for animal feed as a means to ensure food security considering the current economic struggle. They also banned the use of broken rice for animal feed,” he charged.  Potential poultry shortage or price hike According to Gunasekara, the industry faced its biggest problem during the Maha season, when the investments the association and its members put into the maize cultivations failed to yield results because of the chemical fertiliser ban imposed by the Government.  He stated that 90% of maize cultivation is done during the Maha season, and that this year there was a severe drop in production because of the fertiliser ban, with farmers having claimed that the drop in crop production may reach 70%.  “If we don’t receive the necessary maize from domestic production for the next year, it will be a major problem. Then there is an even more urgent need to import. About 70% of our production cost goes for animal feed. The biggest problem is that some of the ingredients to make animal feed are not produced in Sri Lanka. For example, the protein source for animal feed is a by-product of soy, but that is mainly produced in the US, and we cannot bring it down because of the dollar shortage. Earlier, we were able to get a three-month credit for soy from the US exporters, but we do not have that concession anymore. We are unable to open Letters of Credit (LCs) as well. We got an order from the Government to bring down 40,000 MT of maize to manage this month. However, despite the order, we don’t have the dollars available in the country to facilitate this import, and the exporters won’t give us goods on credit,” Gunasekara explained.  He said the association had aimed to ensure that there was an adequate supply of chicken and eggs for the festive season in December, and that they have been able to ensure that supply was there.  “At present a kg of frozen chicken with skin is about Rs. 630. This is a good thing because if there had been a shortage in supply, then a kg could have gone up to Rs. 1,000,” he said.  Gunasekara pointed out that the major hurdle coming up would be in April this year, and that they had urged the Government to provide adequate dollars to import ingredients for animal feed.  “Our biggest challenge is the upcoming festive season in April for the Sinhala and Tamil New Year, and we expect things to normalise in the country from January. So the question is whether we can continue production in the current manner to meet the demand that would be required. Many farmers have not bred more chickens because of the severe shortage in animal feed. We have spoken with the Minister of Finance and we expect to speak to him next week when he returns to the country. We need a minimum of $ 25 million a month to bring down ingredients necessary for animals. If the Government can provide that, then we can assure our farmers that animal feed would be available and that they could go ahead and breed more animals. “What we have experienced is that when there is ample production we can control the price of the product, but if production is hindered then demand will surpass supply and we will have no way of controlling the price of poultry products. The price can go up and we won’t be able to stop it, because even if the price increases to Rs. 1,000, people will buy it due to the demand. The price will become dependent on supply and demand. Therefore, we urge the Government to facilitate the required dollars. We have always come up with solutions when we discuss with the Government, not just the problems,” Gunasekara commented.  LPG problems Gunasekara pointed out that the LPG problem had also affected poultry farmers, as there had been fires at several farms, killing thousands of animals. On 11 December, at least 8,200 chickens were reported dead after a fire broke out at a poultry farm in Waragala, Kotadeniyawa, and another 3,000-odd chickens were killed when a fire erupted in a farm in Pannala on 24 December.  “Gas is required to provide warmth to chicks or hatchlings soon after they’re born. Now, on two occasions, there have been fires at poultry farms killing thousands of chickens in the inferno. This is because of gas leaks. Never in my life have we experienced fires due to gas leaks. There have been small fires due to electricity shorting on occasion, but this is the first time that gas has caused such fires. Farmers are now taking steps to place gas cylinders outside and to constantly monitor the cylinders. Some have opted for electric heaters,” Gunasekara said.  Meanwhile, Bairaha Farms PLC Chief Executive Officer (CEO) Yakooth Naleem, speaking on behalf of the company, said that industry representatives had reached out to the Government for assistance with the dollar issue. He echoed Gunasekara’s view of the crisis at hand.  “Representations are being made by the association to the Government on the issue we are facing. The Government has been quite helpful, as this is the first time that the Government has given permission to import maize (after its stoppage last year). The only issue is the dollar problem, because that is the biggest challenge at this juncture – getting the dollars released from the bank, and not just for us, but for many industries,” Naleem commented.  He said that it was likely that in the coming weeks and months consumers would not be able to buy the same amount of chicken as they did previously due to possible shortages.  “There are two problems; one is the dollar issue and the other is the raw material prices at which the farmer can buy. These prices keep moving up day by day, and this results in the cost of production increasing. Thus the chicken prices go up to keep up with the cost of production. At the end of the day, the question remains whether the consumer will be able to buy the same volume they used to buy,” he elaborated. 


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