Poultry farmers turn to hedging

Seasonal uncertainties and outbreak of bird flu have changed the face of the poultry farming business in the last two years. Poultry farmers, in and around Mumbai, have taken to contract farming and hedging, in order to insulate their businesses from losses.

Almost all the open farms in the Khopoli - Pune stretch have now turned to contract farming. At the heart of seasonal downturn is the festival season. "Every year festival season brings with it jitters, as demand slumps and but there is no slowdown in production, which saddles us with huge stocks,"says the manager of a farm in Khopoli. Mumbai forms the main market for poultry farms for areas around Nashik, Raigad and Pune.

The city's demand for poultry meat is around 350 to 400 tonnes per day. However, it falls by nearly 70 per cent with the beginning of the hindu holy month of Shravan in July, which is closely followed by Janamashtami, Ganesh Chaturthi, Navratri and Diwali and demand does not pick up until Chritsmas and New Year.

"Every year till July we have a good market, this year we were getting Rs 32 per kilo of poultry meat till July. But with the onset of Shravan and the festivals that follow, the price of poultry meat has falls to Rs 18 per kg," said the manager of Zorabian Chicks at Khopoli. "The input cost on every chick till it gains 1.6 kg is between Rs 50-55. But all we can get now is Rs 18-21 per kg," he said.

It is the same situation at the bigger hatcheries too. Says Dr Prakash Yashwante of Venkateshwara Hatcheries which meets nearly 20 per cent of Mumbai's demand poultry meat demand, "We face a 50 per cent loss during this season every year. But we cannot keep the chicks unsold as they have to be fed, and thus raise our input cost for everyday extra day we keep them," he says, adding, "We suffer losses for almost eight months of the year. Only four months bring us good business which evens out our losses throughout the year."

Since the production cost remains the same around the year, it is the market which decides the profit or loss for the farms. "Poultry industry is a fast-rotation business, and production must always be ahead of demand. We have to sell the birds at any cost. Even a single day's delay can cost us heavily," says Yashwante.

Adds the Zorabian manager, "Sometimes the prices of the birds can even go down as low as Rs 10-12 per kg as we experienced last year because of the bird flu epidemic." Despite the seasonal nature of the business rising incomes, changing lifestyles and increased sales efforts are expected to grow the broiler industry in India by 9 per cent in 2005. One reason for the expected rise in consumption is assurance of continued supply from the farmers who are inreasingly turning to contracts.

Of the 100-odd chicken farms in the Khopoli area, around half have entered into contracts with big hatcheries. Among the reasons are diseases like avian flu and bird flu have significantly added to uncertanitiy. Also, independent farmers are not getting the right price for the birds, keeping in mind rising input costs.

The open farms which were owned and controlled by individual farmers, have been replaced by contract farming. Poultry companies provide the farmers with free chicks, medicines and feeding products. The only requirement from the farmer's side is a shed with good capacity. The companies also set down some standards for the chicks that are bred, in terms of standard weight of the bird.

In the open farms, there used to be birds of different age groups in order to sustain the supply in the market. However, it is very difficult to carry on with that model, say farm owners. "Minor diseases perpetually ail the birds. So while keeping birds of different age groups together, the diseases often get transmitted from the older birds to the new chicks. And with younger birds not gaining weight due to the illnesses, the cost of production goes up," says Rakesh Kumar Suri, who has a farm in Panvel.

Moreover, birds have to be fed for 35 to 40 days before they gain weight. If the birds are of the same age group, farmers have to to wait for next 40 days for the new product to get ready. Then came companies like Venkateshwara and Zorabian with the "all in all out" scheme, which means that the age group will be the same for the birds and they will be cleared all at once and then followed by new bunch of chicks.

This reduces the spread of diseases, while assuring the farmers of some benefits. Earlier, because of the uncertainties and fluctuations involved in the poultry business, the open farmers find it difficult to get optimum prices for their birds. Now, after contract farming, farmers are getting at least Rs 2.75 on every kg from the company on meeting the criteria set by the company.

This again gives an assurance to the farmers of some benefits at the end and are not so scared of the fluctuations and uncertainties of the poultry industry.