If chicken is cheaper, why should eggs cost so much?

According to data from economists, retail inflation in chicken was a negative 3.9% in December 2023 and negative 0.8% in November 2023, compared to 7.8% in December 2022. On the other hand, retail inflation in eggs was at 4.4% in December 2023 and 5.9% in November 2023, compared to 6.9% in December 2022.
According to data from economists, retail inflation in chicken was a negative 3.9% in December 2023 and negative 0.8% in November 2023, compared to 7.8% in December 2022. On the other hand, retail inflation in eggs was at 4.4% in December 2023 and 5.9% in November 2023, compared to 6.9% in December 2022.

Summary

  • Chicken prices have been falling for over a year, while egg prices have been rising due to demand from ethanol makers and a rise in exports to Sri Lanka

New Delhi: In a twist to the chicken vs egg debate, prices of chicken (broiler) have been falling for more than a year now while egg prices have been on the rise, though the pace of rise in egg prices has slowed a little.

The surge in egg prices is attributed to the rising cost of feed (corn or maize and soybean meal) owing partly to demand from ethanol makers, and tightening supply in the domestic market following a dramatic rise in exports to Sri Lanka. And chicken prices fell due to lukewarm market demand as well as oversupply from rising bird weights, according to industry players and agronomists.

According to data from economists, retail inflation in chicken was a negative 3.9% in December 2023 and negative 0.8% in November 2023, compared to 7.8% in December 2022. On the other hand, retail inflation in eggs was at 4.4% in December 2023 and 5.9% in November 2023, compared to 6.9% in December 2022.

While January’s official numbers are not in yet, experts said chicken prices have declined further, and egg prices have risen year-on-year but declined on-month.

“In January, chicken prices have witnessed a decline of 9% on-month and 26% on-year. This is due to a surplus supply of broilers amid moderate demand. Large players have gone for capacity addition leading to higher market supplies," said Pushan Sharma, director of research at rating agency Crisil.

“However, egg prices increased moderately by 4% on-year while the variation on-month is reported to be a 2% decline in January. Egg prices are typically regulated in the entire country by National Egg Coordination Committee and, hence, tend to show lower volatility," Sharma added.

Currently, at key centres of Bengaluru, Delhi, Kolkata and Mumbai, farm-gate egg prices are at 545-610 per 100 units as of Thursday, while farm-gate chicken prices are in the range of 90-106 per kg in Bengaluru, Delhi and Kolkata, according to industry officials.

“As far as chicken rates are concerned, demand in a few regions gets hit because of the wedding season. Moreover, due to the extreme winter and foggy season, late-night outings to restaurants and hotels have been fewer. Now the weather is improving, so demand is expected to improve," said Ricky Thaper, treasurer of Poultry Federation of India. “However, egg prices are unlikely to ease before March until fresh arrivals of maize hit the market."

Queries sent to the animal husbandry and dairying ministry remained unanswered till press time.

One reason behind rising egg prices is aggressive imports by Sri Lanka, industry sources said. Last August, the country had decided to import 92 million eggs from India in three months, against 2 million in earlier years.

In the four months since (till November), more than 155 million eggs have been exported to the island nation. It has also got approval to import another 18 million eggs from India, creating a demand-supply gap in the domestic market.

Sri Lanka has relied on India for eggs since March 2023 when the country faced significant egg shortages after a foreign exchange crisis impacted animal feed imports.

“While the domestic market remains buoyant, this is by far the largest-ever export of eggs by India," said Nishant Lakkar, founder and CEO of AAA Rating Consultants and Advisors (AAARCA). “This has resulted in a shortage in the domestic market; therefore, the price has increased for a few months and is likely to continue."

According to data from the animal husbandry and dairying department, total egg production in India in 2022-23 was estimated at 138.38 billion units, a growth of 33.31% over 2018-19. India is the third largest egg producer globally and exports most of its produce to Nepal, Oman, and Bangladesh.

Another reason for the rise in egg prices has been rising feed costs, especially of maize, over the past few years.

“Maize production is estimated to have improved by 5% on-year in kharif 2023-24, leading to positive supply. This has been reflected in a marginal dip in prices in 2023. However, the dip is on a high base and the prices are still higher by 20-22% compared to the previous five-year average," Sharma explained.

Despite the rise in maize supply, prices of the crop are now at 26,000 per tonne compared to 19,000-20,000 a tonne a few months ago.

This has happened due to two factors. One, the rate of growth in poultry, meat and chicken production has surpassed the growth in maize and soybean output. While the production of crops has been rising at 1.5-2% annually, that of eggs and broilers has been rising at 6-9% per annum.

And two, increasing demand from ethanol makers, who have now turned to maize to achieve India’s E20 (20% ethanol blended petrol) goal by 2025-26 from existing capacity of 12%.

India’s annual maize production of around 34 million tonnes, there, is insufficient to meet the poultry requirement as well as the demand from ethanol makers.

“Despite the bottlenecks, the poultry industry is anticipated to grow modestly at around 6-7% this year," Lakkar shared. “While the demand is expected to remain moderate in the near term, the profitability of the sector is largely dependent on smart placements of broilers and raw material price management, which is expected to pose key rating challenges at least for the mid-sized players with limited financial flexibility."

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