Chicken prices to the moon

In today's Finshots we talk about why chicken prices are on the rise.

The Story

Over the last few weeks, chicken prices have skyrocketed across many parts of India. This includes the farm gate price — where farmers sell live birds to customers. And the retail price — where you get dressed chicken, without the feathers and other organs.

And while some people believe this could be a temporary blip, poultry farmers aren’t convinced that this is in fact the case. They allege that prices are on the rise because it’s now more expensive to raise poultry and they have some solid facts to back their argument.

Consider soybean meal for instance. Soybean meal is a rich protein source and if you’re a poultry farmer, you’ll probably be using this alongside maize to feed and raise your birds. However, soybean meal prices have been on the rise these past few months. According to one report in The Week — "Prices have gone up from Rs 35 per kg to Rs 76 over the last three to four months." And while we’ve witnessed the same trends globally, prices in India have increased at a much faster pace. So you have to ask — “What’s up with that?”

Well, let’s start with the global trends first. Consider Brazil— one of the world’s top exporters of soybean.  Brazil saw unusually dry weather last year and farmers simply couldn’t grow their produce on parched soil. They had to wait and defer planting the crop. And as they continued to bide their time, China began hoarding supplies in a bid to stockpile its reserve buffers. The motive was simple — Extended global lockdowns had the capacity to disrupt supply chains once again and they wanted to make sure they had enough soybeans to fully meet their domestic demand. So with supplies being diverted to the Red Dragon, several importers had to pay a higher price to keep importing this stuff.

So there is a global supply crunch. But it’s further compounded by India’s unique problems. As one article in the Print pointed out — “Soybean sowing in the leading oilseed producing state of Madhya Pradesh has been lagging severely even after a month of the onset of the sowing season.”

Meaning there simply isn’t enough soybean going around. Why is there a lag in production you ask?

Well, blame it on the lacklustre monsoon and a rise in soybean seed prices. The rainfall bit should be self explanatory. It’s nature’s call. You can’t do much here. But soybean seeds appreciating in value — That seems a bit odd.

However, if you pay close attention, you’ll see what’s happening here.

The only way to get new seeds is to grow the plant, and considering the monsoons weren’t kind to soya farmers last year, there seems to be a shortage of indigenous seeds. Also, soybeans are in demand right now everywhere you look. As prices of sunflower and palm oil began rising, consumers started adopting soybean oil as an alternative. So naturally, you have to pay a higher price to get your hands on this stuff. Then there’s the allegation that traders are actively speculating in the commodities market hoping to make a buck or two on soya. These people have no intention of buying soya. They’re just in it for the money.

So when you put all of this together you’ll probably start seeing why “chicken feed” is becoming dearer each day. But we are not done yet. Once the chicken is fed and ready, you still have to get it to the store. There’s transportation involved, there’s labor involved, and other costs associated with marketing chicken. So retail prices are going to be substantially higher. And while you could argue that labor and other costs haven’t exactly been on the up, oil is definitely more expensive. So yeah, if you’re asking why chicken prices are going to the moon, this story should hopefully set the record straight.

Until next time…

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