Margins of poultry industry are expected to contract sharply in FY22 amid the high input costs, rating agency ICRA said.
Prices of soybean and maize, the two key inputs that are used as livestock feed in the poultry industry, are rising sharply.
“We expect industry margins to take a hit led by a spike in soybean and maize prices on an average in FY2022. While many players faced net losses for H1 FY2022, subsequent softening of soybean prices following the government’s actions and new crop supply provided some respite.
“However, recent geopolitical tensions have heated up soybean prices yet again,” said Sheetal Sharad, Vice President and Sector Head at ICRA.
The ongoing geopolitical tensions have heated up soybean prices yet again.
However, earnings of the industry are expected to be supported by a favourable long-term demand outlook, ICRA said.
On the long-term demand, Sharad expects the demand to be favourable, supported by rising urban population, changing eating habits and growing penetration of quick service restaurants.
“Developing efficient distribution with large investments required in cold chain infrastructure and increasing market acceptability of frozen chicken are going to be the key industry drivers in the long term,” Sharad added.