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Eggs to go on the boil -Aarati Krishnan
-The Hindu Business Line

Price increases in inputs may raise break-even for poultry farmers and keep egg prices up

There’s a hue and cry about the soaring price of pulses, the primary source of protein for Indian vegetarians. But non-vegetarians, or more precisely eggitarians, too, don’t have it easy. Prices of their key protein source have been hitting record levels in recent months, with retail egg prices in some pockets of the country topping a record Rs. 5 this July. Domestic egg prices seem set to soar even higher in the coming months.

Data on the wholesale prices of eggs from the National Egg Co-ordination Committee shows that in the major consuming centres, egg prices in the first seven months of 2016 have ruled 13-17 per cent higher than last year’s levels. In Chennai, egg prices averaged Rs. 401 for a 100 this year compared to Rs. 344 last year. In Hyderabad, prices averaged Rs. 359 against Rs. 305. These two cities are located in the two largest egg-producing States in India. Trends in other cities have been equally inflationary. Delhi reported prices of Rs. 357, against Rs. 318 and Mumbai Rs. 399 against Rs. 346.

Seasonal patterns in egg prices in the last five years show that consumers should expect no let-up in the coming months. Every year, egg prices cool off in the summer months of March to May as consumers cut back on consumption, and begin to soar again from August/September, usually peaking out in December and January. This year, prices of this staple have remained elevated even in the summer months. Wholesale prices in Hyderabad, for instance, ruled at Rs. 295 this April, against Rs. 237 in the same month last year. In Mumbai, prices were at Rs. 328 against Rs. 278.

The year 2015, in itself, was quite inflationary for poultry products as heat wave conditions led to the loss of nearly 5 million birds in Andhra Pradesh, the State which accounts for 30 per cent of India’s total production. Despite recovering from that crisis, this year has been no better, with an extended summer in the two southern States reducing egg output and thus leading to short supply.

Domestic egg prices also tend to closely track poultry feed ingredient prices, which have been flaring up in recent months. Poultry feed, which makes up about 70 per cent of the cost of egg production, is heavily reliant on supplies and prices of maize and soyameal. Wholesale maize prices, after crashing from over Rs. 18/kg in 2012 to Rs. 9/kg by September 2014, have recovered since March this year, rising to about Rs. 13/kg in July and prompting the government to authorise imports. Soyameal has seen an even sharper rebound. After plummeting from Rs. 32 a kg to Rs. 20 in March 2016, this ingredient has since shot up to Rs. 29 levels.

Sustained price increases in these inputs may raise the break-even for poultry farmers and thus keep egg prices on the boil for the remainder of this year. Over the medium term, the demand-supply equation will hold sway on prices. Here, the story of eggs is the same as that of other proteins — one of soaring demand, not fully met by supplies.

India’s egg output has grown to 78.5 billion eggs in 2015 from 46.2 billion eggs in 2005, an annual growth rate of 5.4 per cent, but that hasn’t proved adequate to meet demand.

Global picture

Globally, though, egg prices are displaying exactly the opposite trends in 2016, with prices in the US — the world’s largest producer of poultry — recently bouncing off a 10-year low. Prices have tumbled in the past year, as the population of egg-laying birds recovered from last year’s mass culling. The worst ever outbreak of Avian Flu forced US poultry farmers to cull over 30 million birds in 2014-15 and prompted many countries to impose bans on US imports, tightening global supplies of all poultry products.

But the option of meeting domestic shortfalls in egg production through imports isn’t an easy one, given persistent fears of contamination from Avian Flu outbreaks around the world. Globally, consumer preferences are also shifting from eggs sourced from ‘layer farms’ where thousands of birds are bred in captivity to those from cage-free hens.

In the past year, US processed food giants such as McDonald’s, Nestle and Kellogg’s, apart from retail chains like Costco, Target and WalMart have committed to sourcing 100 per cent of their eggs from cage-free producers by 2025. The movement is at a nascent stage in India. But as cage-free eggs would bar the artificial yield-boosting practices of the conventional layer industry, and retail at a stiff premium to generic eggs, this trend could also make eggs a pricier staple for consumers.