The poultry and livestock industry in India frequently finds itself in the dilemma of falling raw material rates of corn or soya meal but higher feed prices. The Indian farmers always pose themselves the same question: Why feed costs increase even when raw material prices drop?

The answer lies in the intricate nature of the Indian feed manufacturing system. The price of the feed does not depend only on the price of corn or soybeans. Various factors such as transportation cost, energy cost, labour, packaging, reliance on imports, supply chain inefficiencies, seasonality, and overhead cost play an important role in deciding the feed price.

The knowledge about these invisible cost drivers is important for better decision-making among poultry, dairy, and livestock farmers. An educated farmer makes better business decisions, particularly in the fast-changing Indian animal nutrition industry.

Feed Industry Statistics in India

The poultry and livestock feed industry in India has been growing fast owing to the increasing consumption of proteins and increased demands for poultry products. As per the industry sources, feed constitutes almost 60-75 percent of the total cost of poultry production in India. Source: FAO

According to estimates, the Indian poultry feed market will maintain steady growth due to urbanization, increased demand for chicken and eggs, and expansion of commercial farms. A slight increase in the price of feed has major implications on farmers’ profits as well as prices of poultry at the retail level.

Reasons Why Feed Costs Increase Even When Raw Material Prices Drop

Transporting and Logistics Costs Increasing

In India, the cost of transport influences feed prices considerably. Despite low prices of maize or soybean from production states such as Madhya Pradesh and Maharashtra, the transportation of such raw materials from their origin to feed mills in other states is costly due to high fuel, toll, labor, and transportation costs.

Poultry farms in states like Haryana, Punjab, Bihar, West Bengal, and Assam may incur higher transport cost when the distance traveled is farther for purchasing raw materials. These costs must be considered in the overall price of the feed products.

Energy & Electrical Expenses for Feed Manufacturing

Contemporary feed manufacturing facilities depend on electricity, boilers, pelletizers, grinders, and other automatic machinery. High electricity rates and fuel expenses in the industry increase the costs of feed production.

From cost analysis of production of feeds in India, the cost of production includes energy consumption, fuel for boilers, maintenance, labor, and depreciation costs. The cost of operation keeps rising despite falling prices of corn.

The electricity rate of many Indian states has gone up in the last few years.

Packaging Costs Are Up by a Lot

Another factor that is contributing to increased feed costs in India is packaging. The packaging industry relies heavily on paper, plastic, and petrochemicals.

With global disruption of supply chains and increases in paper costs, packaging costs have gone up considerably. In India, the price of corrugated boxes and other packaging materials has gone up because of higher chemical, coal, and transportation costs.

This means that even when prices of agricultural commodities fall, packaging costs will increase for feed companies.

Fluctuations in Currency Have an Effect on Imported Feed Additives

There are some feed additives, amino acids, vitamins, enzymes, and other nutritional supplements that are imported into India. With a declining Indian rupee, there will be an increase in the cost of the imported ingredients.

Even if the local maize or soybean meal becomes inexpensive, there may still be a rise in the prices of the imported premixes and other feed additives. This is particularly true in the production of premium poultry feed and high-performance livestock feed.

Raw Material Purchased at Higher Rates

Feed producers usually purchase their raw material in large quantities to ensure supply in the future. In case they have bought soybean meal or maize at higher rates, they cannot lower the price of feeds even if market prices become lower.

The feed mills in India usually maintain inventory periods ranging from a few weeks to months. So any reductions in the market price won’t really affect feed prices.

This situation is very common in the Indian animal feed industry.

Seasonal Demands Keep the Feed Price High

There are other instances in which changes in demand affect the price of feed in India. During winter, festival and marriage seasons, there is an increase in the consumption of poultry in India.

With increased demand for chicken and eggs, the need for feed rises as well. This keeps the feed price high despite any fall in the price of raw materials.

Labor and Operating Costs Are Increasing

Labor shortage and increased labor costs in India have affected manufacturing industries, such as feed production.

Feed production needs trained operators, quality assurance personnel, technicians, loaders, and logistics. Increased labor costs translate into higher operating costs that in turn influence the cost of the feed.

Moreover, equipment maintenance, quality testing, storage, and financing costs are other components of the feed cost.

Good Feed Needs More Than Inexpensive Inputs

Good feed for poultry is not just a blend of inexpensive corn and soy meal. Premium feed products need a balance of nutrients, vitamins, amino acids, toxins binders, enzymes, and minerals.

Quality feed companies concentrate on feed conversion rate, poultry immunity and performance, and not just on lowering input costs.

This implies that feed prices will be maintained at the same level to ensure nutritional standards even when there are cost reductions of inputs.

At Prodigy Foods, quality is still a priority to enhance livestock productivity and farmers’ profitability.

How Can Indian Farmers Handle Increasing Feed Costs?

To lessen the effect of volatile feed costs, there are certain things that Indian farmers can do to handle the situation:

• Buy quality feeds from trusted sources
• Check the feed conversion ratio
• Optimize farm management
• Minimize waste when storing and feeding
• Provide nutritionally balanced feeds
• Bulk buy during stable times
• Concentrate on good poultry health

Feed management is usually more important than purchasing cheap feed.

Conclusion

The prices of feeds in India are not based only on the price of maize and soya beans. There are many other factors like transportation, cost of electricity, packaging, import of additives, labor cost, stock turnover, and seasonal demand that play a part in setting the final feed price.

It is because of this reason that despite temporary reductions in the cost of raw materials, feed costs tend to stay high. It is important for Indian poultry farmers and animal nutrition companies to be aware of this market dynamic.

As the poultry and animal nutrition industry of India keeps expanding, it is important to find partners among those who can provide the best feeds. Prodigy Foods is always ready to offer quality driven feed options to Indian farmers.

Frequently Asked Questions (FAQs)

Why do prices of poultry feed rise in India?

The price of poultry feed in India rises because of an increase in the cost of transport, electricity, packaging, import of additives, labor cost, and variations in demand, despite falling prices of the raw material.

What portion of the cost of poultry rearing does feed represent?

Around 60-75% of the total cost of producing poultry constitutes that of the feed.

Why are there no immediate drops in feed prices following drops in corn prices?

Since feed producers will be operating on stock that was purchased when maize was priced higher, they might not lower prices.

How does the cost of transport influence the price of livestock feed?

Cost of transport includes diesel prices, road tolls, freight charges, and labor charges. Transport cost greatly influences the final price of the feed in India.

Which are the main ingredients included in poultry feed in India?

Main ingredients that form part of poultry feed in India are maize, soya meal, rice bran, wheat bran, minerals, vitamins, amino acids, and feed additives.

How can farmers reduce feed costs effectively?

Farmers can decrease feed costs through proper feed utilization, less wastage, maintenance of poultry’s health, good-quality feeds, and sound farm management practices.