Poultry prices normalizing?

Earlier this week, BR Research noted that while poultry prices may be showing a growth spurt, it is no cause for panic. This article attempts to further examine this claim using historic data of ex-farm prices of broiler chicken.

BR Research used daily price data (365 days) of ex-farm prices beginning 2015 for the past 7 years for Lahore city on calendar year basis. Rudimentary statistical analysis shows that in 5 out of 7 years, daily prices traded below 60th percentile 75 percent of the time (roughly 270 out of 365 calendar days).

The trend persists from the beginning of 2015 to 2017, with 2018 marking the first break from tradition. That year, prices remained on the higher side – ranging in top two quintiles 66 percent of the time. Higher poultry prices that year may be attributable to a variety of factors, from currency devaluation raising cost of imported inputs to abnormal rise in day old chick prices, which petered out in later years.

Since then, poultry prices again demonstrated abnormal behaviour during the pandemic year, when prices remained in the elevated range for 40 percent of the days during 2020 – more often than they remained depressed. That trend finally seems to be reversing in 2021, as prices have remained under 60th percentile for 245 out of 326 calendar year days to-date.

What other conclusions could potentially be drawn from the price data? First, that the days of truly affordable bird meat seem to be over, at least in nominal terms. Between 2015 – 2018, ex-farm prices remained rangebound below Rs 200, with prices climbing above Rs 140 for no more than 90 days each year (2018 being a conspicuous exception).

Although extreme volatility has been the hallmark of poultry market since then – especially during the Covid year – both lower and upper bounds have shifted upwards. Until 2019, ex-farm median prices used to range between Rs 130 – Rs 160; since then, median range has inched closer to Rs 180 – Rs 220.

This is of course not hard to explain given the general inflationary trend in the economy where prices of most inputs from fuel, rent, utilities, to cost of feed inputs and raw material (DOCs) have felt upwards pressure. For average retail consumer, this means that soon the days of broiler chicken costing less than Rs 250 per kg may be over.

Unless wages across the economy also adjust upwards proportionately, poultry may no longer remain an affordable source of protein for bottom of the pyramid consumers. For a political administration that had married itself to lofty goals of eliminating malnourishment and hunger, the growing lack of affordability for poultry may pose a greater challenge than prices of sugar.