India’s broiler producers and meat retailers are facing margin pressures due to rising poultry feed costs, driven by crop stress from a weak monsoon and competing demand from ethanol producers. Maize, which accounts for 55-65% of broiler feed by weight, has seen prices surge to ₹27-28 per kg in late September from ₹12-14 in 2019. Higher feed prices, along with rising energy and transport costs, are pushing up production expenses across the livestock industry.
Companies like DSM Fresh Foods Ltd, which operates the Zappfresh brand, have raised chicken prices by about 5% after procurement costs increased 10%, though they are absorbing part of the increase, resulting in a five-percentage-point decline in gross margin. Despite this, chicken order volumes at Zappfresh rose by about 5% from a year ago during the current festive period. The company expects margin pressure to persist, with demand likely to increase during the main meat season over the next 3-6 months.
Supply constraints are also affecting upstream operations. Nandu’s founder Narendra Pasuparthy estimates that maize production in Karnataka has fallen by 25% this season due to drought and ethanol demand, leading to shortages. The company is increasing grain stocks to guard against further shortages. TenderCuts, which sources and processes poultry through suppliers, is also facing higher input costs but is trying to keep retail prices stable due to consumer sensitivity to price increases.
The impact of higher feed costs extends beyond the poultry industry, affecting consumer prices and food inflation. The cost of a home-cooked non-vegetarian thali rose to ₹59.50 in September, up 6% year-on-year. Overall, food inflation firmed to 5.95% in August, pushing India’s retail inflation to a 20-month high of 4.82%. Economists predict food and beverage inflation to rise further, with potential downside risks to economic growth due to lower agricultural growth and weak rural sentiment.