Will poultry prices decline?

While lockdowns of various hues and colours have made a comeback, poultry prices are far from the territory they had experienced back when during first lockdown. What’s going on?

But before that question is answered, the mystery of poultry prices rollercoaster requires warrants more description. After bottoming out in August around the time of peak mutton season – i.e. Eid ul Adha and Muharram – poultry prices have been on an endless climb, both across the country, and across the value chain.

Consider the timing of this increase. As expected, Covid cases that had bottomed out in Pakistan back in October, have been on a climb since the arrival of the second wave circa November. Yet, the imposition of lockdown and slowdown in commercial activity has failed to make a dent in poultry prices. So has the second wave has had no impact on poultry demand? Or are we in the middle of peak poultry demand?

The lifting of lockdown ushered in resurgence of social gatherings, attracting demand from activities such as conferences, office spaces, canteen/cafeterias of educational institutions, but most of all the wedding season.

Since mid-November and PM’s speech, SOPs and restrictions on social gatherings have made a comeback, but an implosion of poultry demand has not. Is administrative indecisiveness regarding imposition of severe restrictions on social and commercial activity translating into persistent demand for poultry?

That’s of course, one theory. But a bigger question is whether the prices will eventually collapse as the second wave gathers severity. Look closely at prices of day-old chicks (DOC) across major demand centres such as Lahore and Karachi, and it appears that poultry prices are very far from easing any time soon.

But there is another angle, which insists that the recent peaking of poultry prices is more supply driven than demand driven. Prices of poultry feed inputs are on a global resurgence since at least July, and while demand is nowhere close to the pre-lockdown levels, there is little chance that poultry feed input prices will ease in near future.

Why? The keyword answer is: supply side disruption. Global supply of inputs such as soybean is concentrated with few supplying countries in the western hemisphere, in particular Brazil, Argentina, and USA. Of the three, the countries in South America have imposed restrictions on export of key inputs to ensure sufficient domestic supply, leading to price spiral in the international market.

While Pakistan has been self-sufficient for maize over the last decade, it doesn’t help that the crop feed has suffered yield losses in the most recent season, while Pakistan has little to no soybean crop. Together, the two crops – maize and soybean – constitute over 90 percent of the cost of feed production through the lifecycle of growing the bird.

For as long as cost of feed remains high, chances of domestic poultry prices imploding remains slim.