After climbing to fresh peaks in May 2022, broiler chicken prices have declined nationally over the past three weeks, with greatest decline of 30 percent witnessed in the southern city Karachi. The fall in prices appears counterintuitive, given the 30 – 40 percent rise in fuel prices during the same period. What gives?
Before the new government – following tradition – claims victory for bringing down prices of kitchen essentials, it bears emphasis that the fall is almost entirely seasonal. Prices of broiler chicken are undergoing a seasonal phenomenon, as demand tapers post Ramzan and Eid ul Fitr – before touching bottom by Eid ul Azha.
Curiously though, not all prices are behaving as per routine. Price of farm eggs has risen by over 15 percent during the same period. This is despite the seasonal decline in eggs consumption during peak summer and school holidays season. Has the rise in transportation costs already begun to play havoc with prices in off-season?
Maybe, but poultry woes extend well beyond fuel and energy prices – which albeit also play a sizable role. Over the past six months alone, prices of imported components of poultry feed such as soybean have risen by as much as 30 percent in dollar terms, with landed cost further compounded by currency depreciation.
Sector watchers will recall that poultry inputs such as soybean remained the conspicuous exception in the Covid-induced downturn globally, as port lockdowns and labor shortages in exporting nations led to a rise in international prices. Soybean prices have doubled since May 2020globally, not so dissimilar from maize.
Fortunately – unlike soybean – Pakistan is self-sufficient in maize production, insulating local value chain from the double whammy of currency depreciation. However, local maize prices have also galloped ahead by 20 percent since February 2022, as the country has exported a sizable quantum – an estimated 0.4MMT – in the ongoing fiscal. Opportunistic exporters have been able to take advantage of higher maize prices in international market following Russian invasion of Ukraine, which has all but cut off Black Sea exports from rest of the world.
Passionate appeals from the poultry industry’s representatives have followed this flurry of export. Thankfully, outrageous appeals to ban maize export have not found a friendly ear in a trigger-happy coalition government, which previously banned sugar export, refusing to take advantage of surplus output at home.
But turning down one request does not justify GoP turning a blind eye to industry’s woes altogether. Poultry industry faces high tariffs on a number of imported inputs from soybean seeds to grandparent and parent stocks, DOCs, vaccines, vitamins, enzymes and other inputs such as oilcakes. In fact, the last Supplementary Finance Bill 2021 imposed higher tariffs on as many as 50 items related to poultry inputs at import stage, taking the total tax impact to 22 – 32 percent.
Over the past three years, poultry prices have risen by as much as 50 percent (annual average), as a result of inflationary pressures in input costs, Covid-led losses(loss of flock), and demand slowdown. Rather than taking the protectionist route by banning raw material export to control poultry prices, GoP can offer the industry a level playing field by tariff rationalization. But so far, timely decision making does not appear to be a strong suit of the present coalition government. Act now!
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